Existing home sales in the U.S. unexpectedly fell in June, reaching a seasonally adjusted annual rate of 4.09 million units, a 2.4% decrease from the previous month, according to data released by the National Association of Realtors (NAR).
This decline falls short of economists' expectations, who had predicted an increase to 4.20 million units. The drop was observed in the Midwest, South, and West regions, although sales saw an increase in the Northeast. The figures reflect contract closings that likely occurred in April and May.
Mortgage rates, while having retreated from their peaks following geopolitical events, remain elevated. The average rate for a 30-year fixed mortgage is approximately 45 basis points higher than its pre-conflict level. This sustained high cost of borrowing is contributing to a slowdown in sales, as potential buyers are priced out of the market.
Despite the monthly dip, overall home sales were up 2.8% on a year-over-year basis in June. NAR chief economist Lawrence Yun noted the sensitivity of home buyers to affordability conditions, citing the fluctuations in monthly sales activity as a result of mild changes in mortgage rates.
Seller Hesitancy and Inventory Challenges
Higher mortgage rates are also discouraging existing homeowners from listing their properties, many of whom hold mortgages with rates below 5%. The inventory of previously owned homes available for sale decreased by 0.6% to 1.56 million units. Year-over-year, however, supply saw a slight increase of 1.3%.
A persistent national housing shortage, particularly for entry-level homes, is estimated by the National Association of Home Builders to be around 1.2 million units. This scarcity is a key factor in maintaining elevated house prices.
At the current sales pace, it would take 4.6 months to deplete the existing home inventory, a figure unchanged from the previous year. The median price for an existing home reached a record high of $440,600 in June, an increase of 1.8% from the prior year.
First-time homebuyers constituted 33% of all sales in June, an increase from 30% a year ago, though a robust housing market typically sees this demographic account for 40% of sales. Properties are staying on the market longer, with the median number of days on market rising to 28 from 27 a year prior. Distressed sales, such as foreclosures, accounted for 2% of transactions, down from 3% last year.
In related legislative news, Congress recently passed a bipartisan housing affordability bill. This legislation includes provisions aimed at restricting investment firms' single-family homeownership and streamlining environmental reviews for construction projects. However, President Trump has indicated he will not sign the bill until a separate voting bill is enacted.