Existing-home sales declined 5.4% from May to a seasonally adjusted annual rate of 5.12 million in June, according to a new report from the National Association of Realtors (NAR).
The decrease marked the fifth consecutive month that existing-home sales have slid on a monthly basis. Total existing-home sales have now receded to the lowest level since June 2020, when real estate activity lulled due to COVID-19 related lockdowns and restrictions. Single-family home sales fell 4.8% monthly to an annualized pace of 4.57 million units, while sales of condos and co-ops slide 9.8% to a 550,000-unit rate.
While some continued market weakening was expected, the magnitude of the sales decline was a surprise. Experts polled by Reuters projected total existing-home sales at an annualized rate of 5.38 million units. Actual sales also fell short of the 5.47-million-unit potential home sales pace projected by First American Financial Corp. for June.
Year over year, sales dropped 14.2%, as a confluence of adverse economic conditions for homebuyers have torpedoed transaction activity.
“Falling housing affordability continues to take a toll on potential home buyers,” said Lawrence Yun, the NAR’s chief economist. “Both mortgage rates and home prices have risen too sharply in a short span of time.”
Indeed, the monthly principal and interest (P&I) payment for the average-priced home with a 20% downpayment in May reached $2,100, according to data from Black Knight. That’s up nearly $750 so far this year, and nearly double the $1,089 monthly P&I payment from early 2020. Wells Fargo economists noted that the average mortgage payment now takes up about 36% of average household income — the largest share since the mid-1980s.
Meanwhile, price growth, while cooling somewhat, simply refuses to let up. The median existing-home price in June reached $416,000, up 13.4% year over year and eclipsing $400,000 for the second straight month. Prices have now increased year over year for 124 consecutive months, the longest streak recorded by the NAR.
And while Redfin recently reported that competition continues to dwindle, properties are still selling in record time. Properties typically stayed on the market for 14 days in June, down from 16 days in May and 17 days in June last year. June’s 14-day market time is the shortest since the NAR began keeping track in May 2011.
If there’s any silver lining to the NAR’s report, it’s that the sales slowdown has allowed some recovery in supply. Total housing inventory at the end of June was at 1.26 million units, up 9.6% from May and 2.4% from June 2021. Unsold inventory is now at a supply of 3.0 months at the current sales pace, up from 2.6 months in May and 2.5 months in June 2021.
“Finally, there are more homes on the market,” Yun added. “Interestingly though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”