Title: Shifting Real Estate Market: Home Sales Decline as Buyers Gain Upper Hand
The real estate market experienced a decline in sales of previously owned homes in June, marking a 5.4% drop compared to May, according to the National Association of Realtors. On an annual basis, sales were also 5.4% lower than June of the previous year. This slowdown in sales represents the slowest pace since December.
The decrease in sales can be attributed to the surge in mortgage rates during April and May, when the average rate on the 30-year fixed mortgage surpassed 7%. Although rates have since slightly decreased to the high 6% range, the impact on buyer demand and affordability has been significant.
Lawrence Yun, chief economist for the Realtors, explains that the market is transitioning from a seller’s market to a buyer’s market. Homes are staying on the market for longer periods, and sellers are receiving fewer offers. Buyers are now more insistent on home inspections and appraisals, indicating a shift in power dynamics.
One factor contributing to this shift is the rise in inventory levels. Inventory has increased by 23.4% compared to the previous year, reaching 1.32 million units by the end of June. While this is an improvement from record lows, it still only represents a 4.1-month supply. A balanced market between buyers and sellers typically requires a six-month supply.
These inventory levels, however, have not yet alleviated the pressure on prices. The median price of existing homes sold in June reached $426,900, marking a 4.1% increase year over year and reaching an all-time high for the second consecutive month. This increase is largely driven by the stronger performance of higher-end properties.
Sales of homes priced over $1 million were the only price category to see gains compared to the previous year. Conversely, the biggest drop in sales occurred in the $250,000 and lower price range. The supply of homes for sale remains weakest on the lower end, although there is a new surge in listings.
Despite the high national sales price, new listing prices are actually lower. Danielle Hale, chief economist for Realtor.com, notes that the influx of smaller and lower-priced listings has contributed to holding down the median listing price. In fact, the number of homes listed in the $200,000 to $350,000 price range has surged by 50% compared to the previous year.
The market also witnessed changes in buyer behavior. Higher-end buyers tend to rely more on cash transactions, with 28% of sales being all-cash purchases, up from 26% the previous year. However, there has been a slight decrease in investor activity, accounting for 16% of sales compared to 18% last year.
Looking ahead, Lawrence Yun suggests that if inventory continues to increase, two possible outcomes may occur. Either home sales will rise or, if prices do not rise, they may experience a decline. This indicates that the market is at a critical juncture and could witness further shifts in the coming months.
In conclusion, the real estate market is experiencing a shift from a seller’s market to a buyer’s market. The decline in home sales, coupled with an increase in inventory levels, has provided buyers with more leverage and options. However, despite the increase in supply, prices have remained high due to the stronger performance of higher-end properties. As the market continues to evolve, it remains to be seen how sales and prices will respond to these changing dynamics.
