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Median U.S. home price hits an all-time high

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  Sales of previously occupied U.S. homes slid in June to the slowest pace since last September as mortgage rates remained high.

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US Home Sales Plunge in June Amid Record-Breaking Price Surges


In a stark reflection of the ongoing challenges plaguing the American housing market, sales of existing homes across the United States experienced a significant decline in June, even as home prices climbed to unprecedented heights. This downturn underscores the persistent pressures of high mortgage rates, limited inventory, and affordability barriers that are reshaping the real estate landscape for buyers, sellers, and the broader economy.

According to the latest data from the National Association of Realtors (NAR), existing home sales, which encompass the majority of the housing market including single-family homes, townhomes, condominiums, and co-ops, fell by 5.4% from May to June. On a seasonally adjusted annual basis, this translated to a sales pace of 3.89 million units, marking the lowest level since December of the previous year. This drop was not isolated; compared to June of the prior year, sales were down by 5.4% as well, highlighting a consistent pattern of weakening demand amid economic headwinds.

The primary culprit behind this sales slump appears to be the stubbornly high cost of borrowing. Mortgage rates have remained elevated throughout much of the year, hovering around 7% for a 30-year fixed-rate loan, a sharp increase from the sub-3% rates seen during the height of the pandemic. This has dramatically increased monthly payments for potential buyers, making homeownership feel increasingly out of reach for many Americans, particularly first-time buyers and those in lower income brackets. Economists note that these rates are a direct response to the Federal Reserve's aggressive efforts to combat inflation through interest rate hikes, which have ripple effects across consumer lending.

Compounding the issue is a severe shortage of available homes on the market. Inventory levels, while showing slight improvements, remain historically low. At the end of June, there were approximately 1.32 million homes available for sale, representing about 4.1 months of supply at the current sales pace. This is an increase from the 3.1 months seen a year earlier, but it's still far below the 5-6 months that typically indicate a balanced market. The lack of supply stems from multiple factors: homeowners who locked in low mortgage rates years ago are reluctant to sell and face higher rates on a new purchase, a phenomenon often referred to as the "mortgage rate lock-in effect." Additionally, new home construction has not kept pace with demand due to labor shortages, rising material costs, and regulatory hurdles in many regions.

Despite the slowdown in sales, home prices have continued their upward trajectory, defying expectations and adding another layer of complexity to the market dynamics. The median existing-home price for all housing types in June reached a record $426,900, up 4.1% from the same month a year ago. This marks the 12th consecutive month of year-over-year price increases, with the figure surpassing previous highs and illustrating the intense competition for the limited homes that are available. In high-demand areas, bidding wars remain common, driving prices even higher and sidelining buyers who cannot afford to compete.

Regionally, the sales decline was widespread but varied in intensity. In the Northeast, sales dropped by 2.1% from May, while the Midwest saw a more pronounced 8% decrease. The South, which accounts for the largest share of the market, experienced a 5.9% fall, and the West was down 2.6%. Price growth also showed regional disparities: the West led with a median price of $624,000, a 4.4% increase year-over-year, followed by the Northeast at $513,100 (up 9.7%), the Midwest at $321,200 (up 5.5%), and the South at $374,300 (up 2.3%). These variations highlight how local economic conditions, job markets, and migration patterns influence the national picture. For instance, states like California and New York continue to grapple with affordability crises, while Sun Belt areas attract buyers seeking lower costs of living, though even there, prices are rising rapidly.

The implications of this market slowdown extend beyond individual buyers and sellers. A sluggish housing sector can dampen overall economic growth, as real estate transactions drive related industries such as construction, home improvement, and financial services. Consumer spending may also take a hit, as potential homeowners delay purchases and redirect funds elsewhere. Moreover, the persistent rise in home prices exacerbates wealth inequality, benefiting existing homeowners who see their equity grow while locking out younger generations and lower-income families from building wealth through property ownership.

Experts within the industry offer a mix of caution and optimism. Lawrence Yun, chief economist at the NAR, has pointed out that while sales are down, the gradual increase in inventory could provide some relief in the coming months. "More inventory is good news for buyers, but we need to see mortgage rates come down to truly stimulate demand," Yun remarked in a recent statement. He anticipates that if the Federal Reserve begins cutting interest rates later this year—as many analysts predict—sales could rebound modestly by the end of the year or into the next.

However, not all forecasts are rosy. Some economists warn that without a significant boost in housing supply, prices will continue to climb, potentially leading to a prolonged period of stagnation. The Biden administration has proposed measures to address the affordability crisis, including incentives for new construction and down payment assistance programs, but these initiatives face political and implementation challenges. On the state level, efforts to reform zoning laws and encourage affordable housing development are gaining traction in places like Oregon and Minnesota, but progress is slow.

Looking deeper into the data, the composition of sales reveals additional insights. First-time buyers made up only 29% of purchases in June, down from 31% a year ago and well below the historical average of 40%. This decline reflects the barriers faced by younger buyers, who often lack the savings for large down payments or the credit history to secure favorable loans. All-cash sales, meanwhile, accounted for 28% of transactions, up from 26% the previous year, indicating that wealthier buyers and investors are dominating the market. Distressed sales, such as foreclosures and short sales, remained minimal at 2%, a sign of overall market stability despite the slowdown.

The new home market offers a contrasting picture, with builders reporting somewhat stronger sales due to incentives like rate buydowns and price reductions. However, even there, high costs and economic uncertainty are tempering growth. The Census Bureau's data shows new single-family home sales edging up slightly, but at a pace that doesn't fully offset the existing home slump.

For prospective buyers navigating this environment, strategies include improving credit scores, saving aggressively for down payments, and considering adjustable-rate mortgages or government-backed loans like those from the FHA. Sellers, on the other hand, may benefit from the high prices but face longer listing times—homes typically stayed on the market for 22 days in June, up from 18 days a year ago.

As the summer selling season winds down, all eyes are on upcoming economic indicators, including inflation reports and employment data, which could influence the Fed's decisions. If rates begin to fall, it might inject new life into the market, but until then, the combination of falling sales and soaring prices paints a picture of a housing sector in flux, where opportunity coexists with significant hurdles.

This ongoing saga in the US housing market serves as a barometer for broader economic health. With affordability at historic lows—the NAR's Housing Affordability Index hit its lowest point in decades—policymakers, industry leaders, and consumers alike are grappling with how to restore balance. Whether through increased supply, lower rates, or innovative financing, the path forward will require concerted efforts to make homeownership accessible once more. As we move into the latter half of the year, the housing market's trajectory will undoubtedly influence everything from family decisions to national policy debates, reminding us of the central role real estate plays in the American dream.

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Read the Full Seattle Times Article at:
[ https://www.seattletimes.com/business/us-home-sales-fall-in-june-as-prices-soar-to-new-heights/ ]


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