Home sales in June fell to the slowest pace in 14 years

House for sale in Arlington, Virginia, July 13, 2023.

Saul Loeb | AFP | Getty Images

Pre-owned home sales fell 3.3% in June compared to May, at a seasonally adjusted annual rate of 4.16 million units, according to the National Association of Realtors.

Compared to June last year, sales were 18.9% lower. This is the slowest pace of sales for the month of June since 2009.

The continued weakness in the housing market is not due to a lack of demand. It’s all about an acute shortage of supplies. There were only 1.08 million homes for sale at the end of June, which is 13.6% less than in June 2022. At the current pace of sales, that’s 3.1 months of supply. A six-month supply is considered balanced between buyer and seller.

“There simply aren’t enough homes to sell,” said Lawrence Yoon, chief economist for Realtors. “The market can easily absorb double the inventory.”

This dynamic is keeping pressure under house prices. The median price of an existing home sold in June was $410,200, the second-highest price ever recorded by Realtors. Last June’s price was the highest, but only by 1%. However, this average metric also reflects what is being sold, and right now, with mortgage rates much higher than a year ago, the low end of the market is the most active.

“Home sales have declined, but home prices have stabilized in most parts of the country,” Yoon said. “Limited supply continues to result in multi-offer situations, with a third of homes selling above list price in the last month.”

Sales aren’t likely to recover anytime soon, because mortgage rates weigh on affordability. Realtors measure June sales based on closings, so contracts signed are most likely in April and May. Mortgage rates remained stuck in an average range of 6% during that period and then increased by more than 7% at the end of May. Prices remained in the 7% range for the entire month of June, as home prices rose.

First time buyers suffer the most. And their share of June sales fell to 26%, down from 30% in June 2022. This is the lowest share since brokers began tracking this metric.

However, the higher end of the market appears to be recovering. While sales fell across all price points, they were down at least on the higher end. That wasn’t the case last year, when sales of prime-priced homes fell sharply.

As competition heats up, buyers are increasingly using cash to win over sellers. All cash sales accounted for 26% of June transactions, which is slightly higher than both May and June of last year.

Sales are unlikely to rebound soon in the current domestic market, but newly built home sales are reaping the benefits. DR Horton, the nation’s largest homebuilder, reported a large jump in new orders jumping in its latest earnings release Thursday.

“Despite continued high mortgage rates and inflationary pressures, our net sales orders were up 37% from the prior year quarter as the supply of affordable new and existing homes remains limited and supportive housing demand demographics remain favourable,” Chairman Donald Horton said in a statement.