The cost of buying a new house just hit another all-time high, according to a new report.
Data published by the National Association of Realtors shows the median existing U.S. home sale price jumped to $426,900 in June – a 4.1% increase from the same time last year. That marks the highest level on record and is the second straight month that prices topped a new high.
As prices marched higher, sales of previously owned homes tumbled 5.4% to an annual rate of 3.89 million units.
In a potentially good sign for buyers, however, there was an uptick in inventory last month. At the end of June, there were about 1.32 million homes for sale, according to the report, up 3.1% from the previous month and 23.4% from the same time one year ago.
MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU
“We’re seeing a slow shift from a seller’s market to a buyer’s market,” said Lawrence Yun, NAR chief economist. “Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis.”
Homes sold on average in about 22 days last month. That is down from the 24 days recorded in May but marks an increase from the 18 days in June 2023. Before the COVID-19 pandemic, homes typically sat on the market for about a month before being sold.
At the current pace of sales, it would take roughly 4.1 months to exhaust the inventory of existing homes – the highest level since May 2020. Experts view a pace of six to seven months as a healthy level.
“Even as the median home price reached a new record high, further large accelerations are unlikely,” Yun said. “Supply and demand dynamics are nearing a balanced market condition.”
WHY CAN’T YOU FIND A HOME FOR SALE?
There are a number of driving forces behind the affordability crisis.
Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates and expensive construction materials.
Higher mortgage rates over the past three years have also created a “golden handcuff” effect in the housing market. Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further and leaving few options for eager would-be buyers.
Economists predict that mortgage rates will remain elevated for most of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic, with investors predicting just one or two rate reductions this year.
“Some prospective buyers are simply waiting for mortgage rates to come down after the Federal Reserve cuts rates, most likely in September,” said Lisa Sturtevant, Bright MLS chief economist. “With inflation cooling and the job market still solid, rate cuts are now almost a foregone conclusion, which means those buyers who can wait are doing so.”
Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to a Zillow survey. Currently, about 80% of mortgage holders have a rate below 5%.
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