December 2, 2023

A home for sale in Arlington, Virginia, July 13, 2023.

Saul Loeb | AFP | Getty Images

Existing home sales fell 3.3% in June from May to a seasonally adjusted annualized rate of 4.16 million units, according to the National Association of Realtors.

Compared with June last year, sales were down 18.9%. It was the slowest June sales pace since 2009.

The continued weakness in the housing market is not due to a lack of demand. It’s all about a severe shortage of supplies. At the end of June, there were just 1.08 million homes for sale, a 13.6% decrease from June 2022. At the current sales pace, that equates to a 3.1-month supply. A six-month supply is considered a balance between buyers and sellers.

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

This dynamic has put pressure on house prices. The median price of existing homes sold in June was $410,200, the second-highest price ever recorded by realtors. Prices were the highest in June last year, but only rose by 1%. However, this median metric also reflects sales, and right now, the lower end of the market is most active as mortgage rates are much higher than last year.

“Home sales are down, but home prices are holding up in most parts of the country,” Yun said. “Limited supply is still leading to multiple offers, with a third of homes selling above list price in the latest month.”

With mortgage rates weighing heavily on affordability, sales are unlikely to recover anytime soon. Realtors measure June sales by volume, so contracts were likely signed in April and May. Mortgage rates hovered around 6% during that period before surging above 7% in late May. Rates remained in the 7% range throughout June as home prices rose.

First home buyers are in the toughest position. Their share of sales in June fell to 26% from 30% in June 2022. That’s the lowest share since realtors started tracking the metric.

However, the premium segment appears to be recovering. While sales fell across all price points, sales at the premium end fell the least. That was not the case last year, when sales of high-priced homes fell sharply.

As competition intensifies, buyers are increasingly using cash to win over sellers. All-cash sales accounted for 26% of transactions in June, slightly higher than in May and June last year.

Sales in the existing home market are unlikely to rebound anytime soon, but sales of newly built homes are benefiting. DR Horton, the largest U.S. homebuilder, said in its latest earnings report on Thursday that new orders rose sharply.

“Despite continued elevated mortgage rates and inflationary pressures, our net sales orders were up 37 percent from a year earlier as the supply of affordable new and existing homes remained limited and demographics supporting housing demand remained favorable,” board chairman Donald Horton said in a release.