The housing market is tumbling again, as home sales registered the most sluggish rates since June 2009 even though prices crossed record highs earlier this year. Existing home sales dropped by 18.9% year over year to 4.16 million as of June, lodging a 3.3% decline since May, according to a report released by the National Association of Realtors (NAR).
In addition, the proportion of sales attributed to first-time buyers decreased by three percentage points year over year to 27% in June. This share represents the lowest proportion recorded since the Realtors started tracking this metric.
"The first half of the year was a downer for sure with sales lower by 23%," NAR Chief Economist Lawrence Yun said, "Fewer Americans were on the move despite the usual life-changing circumstances. The pent-up demand will surely be realized soon, especially if mortgage rates and inventory move favorably.
Scarcity In The Housing Sector
The housing market's persisting fragility isn't because of insufficient demand. It's because available homes are scarce. By the close of June, just 1.08 million homes were for sale - a 13.6% decrease compared to the same period last year. This figure translates to a 3.1-month supply at the present rate of sales.
"There are simply not enough homes for sale," Yun said. "The market can easily absorb a doubling of inventory."
Elite buyers have remained relatively unphased by rising home prices, as sales declined by the lowest margin among the wealthy. This stands in contrast to the previous year when sales of higher-priced homes significantly declined.
Housing Prices on the Rise
The housing shortage has caused prices to skyrocket, triggering major concerns regarding the cost of living. Despite recession fears and cooling inflation levels, strong demand in the market amid the extensive scarcity caused home prices to take off. In June, the median price of an existing home reached $410,200, marking the second-highest price ever documented by NAR. The price recorded the preceding June was the highest, albeit with a marginal 1% difference.
"Home sales fell, but home prices have held firm in most parts of the country," Yun said. "Limited supply is still leading to multiple-offer situations, with one-third of homes getting sold above the list price in the latest month."
Is Recovery In Sight?
A swift rebound in sales seems unlikely - at least in the short term - given rising mortgage rates. NAR's June sales data likely encompasses agreements made in April and May. During that period, mortgage rates were hovering around the mid-6% range. But mortgage rates crossed 7% by the last week of May and remained steady into June.
According to Mortgage News Daily, the average 30-year fixed mortgage rate reached 7.48% as of Aug. 21 - the highest point since November 2000, with an increase of 29 basis points in a single week.
"Investors just aren't seeing the kind of deterioration in economic data that they expected," Mortgage News Daily CEO Matthew Graham said.
Declining homebuilder sentiment will also likely contribute to the stagnation in the housing sector, which has plummeted by 6 points so far this month, according to data released by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index.
"Rising mortgage rates and high construction costs stemming from a dearth of construction workers, a lack of buildable lots and ongoing shortages of distribution transformers put a chill on builder sentiment in August," NAHB Chair Alicia Huey said.
