‘Groundhog Day’: Existing-Homes Sales Slump, but Prices Hit New Record High Yet Again

Home prices hit a new high in June even as the number of closings slipped again, continuing recent trends in a market battered by soaring mortgage rates.

Total existing-home sales dropped 5.4% from May, to a seasonally adjusted annual rate of 3.89 million in June, the National Association of Realtors® reported on Tuesday. The June sales figure, which excludes new construction, represented a 5.4% drop from one year ago and is the lowest in 13 years.

The median sales price for existing homes hit a new high of $426,900 in June, up 4.1% from one year ago and topping the previous record of $417,200 set a month earlier. Prices rose in all four U.S. regions.

“The housing market story seems almost the same month to month, like a ‘Groundhog Day’ with home sales stuck at low levels, home prices hitting record highs,” and mortgage rates little changed, NAR Chief Economist Lawrence Yun said on a conference call with journalists.

But offering hope to prospective homebuyers, he added that there are signs the market is beginning a “slow shift” away from a seller’s market toward a market more favorable to buyers.

“Homes are staying on the market a little longer, the multiple offers are dissipating, so maybe a shift away from sellers, and maybe soon we will be entering a buyer’s market,” he said.

The number of unsold existing homes on the market rose 3.1% from the previous month, to 1.32 million at the end of June. That’s equivalent to a 4.1-month supply at the current monthly sales pace, the highest level since May 2020.

Still, it’s well below the six months of inventory that is considered a balanced market, as the mortgage rate “lock-in effect” continues to discourage homeowners who are paying low rates on older mortgages from selling and assuming a higher rate on a new home.

Rates for a 30-year fixed mortgage averaged 6.92% in June, more than double their ultralow levels three years ago, according to Freddie Mac. Rates have since inched down, to 6.77% last week, and are expected to slowly cool with the Federal Reserve widely expected to begin cutting its benchmark rate in June.

“Although mortgage rates crested in early May, topping out at 7.22%, they remained above 7% for the better part of the month—when many June homebuyers would have needed to lock in a mortgage rate,” says Realtor.com Chief Economist Danielle Hale. “Combined with still high and climbing home prices, elevated costs meant that fewer buyers were able to get to the closing table in June.”

Faced with high prices, buyers wait for rate cuts

Mortgage rates last month stood close to where they were in June 2023, when they averaged 6.75%. But despite rising inventory, home sales were lower than a year ago.

“There is more inventory out there to choose from now, but a big difference is that home prices in most markets are higher than they were a year ago and more prospective homebuyers are simply priced out,” says Bright MLS Chief Economist Lisa Sturtevant.

Another major difference from last year, she adds, is the waiting game for buyers who expect mortgage rates to fall as the Fed’s September meeting grows closer.

“Some prospective buyers are simply waiting for mortgage rates to come down after the Federal Reserve cuts rates, most likely in September,” she says. “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.”

Although the Fed is expected to hold its effective rate steady at 5.3% when it meets later this month, bond markets now price in a 94% probability of a quarter-point rate cut during the September meeting.

Mortgage rates, which track yields on 10-year Treasury notes, could begin falling even before a Fed rate cut, as the central bank’s plan to loosen policy becomes more clear.

“The housing market is currently frozen but should slowly recover if the more recent downward trend in mortgage rates is sustained,” says Thomas Ryan, North America economist at Capital Economics.

Ryan is forecasting mortgage rates to drop to 6.5% by the end of the year, and 6% by the end of 2025.

Sales rise only for homes priced at $1M-plus

The NAR data for June shows that the only category of homes that saw an annual uptick in sales was the one priced above $1 million.

The number of sales of homes priced at least $1 million rose 4% from a year ago. Meanwhile, sales dropped 27% for homes priced below $100,000, 18% for homes in the $100,000 to $250,000 range, 12% for the $250,000 to $500,000 range, 8% for the $500,000 to $750,000 range, and 2% for $750,000 to $1 million.

Closed transactions for existing homes dropped in every U.S. region, the report finds.

In the Northeast, sales declined 2.1% from May, to an annual rate of 470,000, down 6% from June 2023. The median price in the Northeast was $521,500, up 9.7% from one year earlier.

Midwest sales decreased 8% from one month ago, to an annual rate of 920,000 in June, down 6.1% from the prior year. The median price in the Midwest was $327,100, up 5.5% on the year.

Sales in the South dropped 5.9% from May, to an annual rate of 1.76 million in June, down 6.9% from one year before. The median price in the South was $373,000, up 1.7% from last year.

And in the West, sales declined 2.6% in June, to an annual rate of 740,000, unchanged from a year ago. The West posted the highest median sales price of the regions, at $629,800, up 3.5% from June 2023.

Yun says that prices continue to rise despite slowing sales in part because there are few distressed sellers who are desperate to unload their properties.

“Even though we are seeing more listings, those listings are healthy listings—people switching jobs, maybe people are moving from retirement to a smaller sized home,” he says. “Those who are putting their homes on the market, it doesn’t appear to be a desperate sale.”