The sizzle is fading from the US housing market. Sales of previously owned homes took a tumble in June, dropping 5.4% compared to May. This shift signals a potential power play – a move towards a buyer's market.
The culprit behind the slowdown? Rising mortgage rates. Remember that sweet 30-year fixed rate below 4% we saw a while back? Gone. In June, it soared past the 7% mark, throwing cold water on many buyers' dreams. This, combined with historically high home prices, has many hitting the pause button.
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| The Housing Market Heats Up, But Not for Everyone |
"The market is definitely changing," says Lawrence Yun, the chief economist for the National Association of Realtors (NAR). "Homes are lasting longer on the shelves, and bidding wars are a thing of the past. Buyers are taking their time, with more demanding inspections and appraisals."
There's a silver lining for buyers though – supply is finally on the rise. Inventory levels jumped a whopping 23.4% compared to last year. This means there are more options to choose from, and bidding wars might become a distant memory. However, don't expect a fire sale just yet. Prices are still climbing, with the median price of an existing home reaching a record high of $426,900 in June.
Here's a twist – the luxury market seems to be defying gravity. Sales of homes priced over $1 million are the only segment experiencing growth. Meanwhile, the affordable end of the market is feeling the pinch the most.
"We're seeing an influx of smaller, more affordable listings hitting the market, which is keeping the median price from skyrocketing," explains Danielle Hale, chief economist for Realtor.com.
So, what's next? Experts predict two potential paths. With more options on the table, sales could pick up again. Alternatively, if demand weakens further, prices might stabilize or even dip slightly.
The affordability crisis isn't going anywhere fast. Years of underbuilding, rising construction costs, and those pesky high mortgage rates are all playing a part. Many homeowners, locked into historically low rates, are reluctant to sell, further squeezing supply.
The good news for buyers? Relief might be on the horizon. Economists predict that mortgage rates will eventually ease up, possibly as early as September, when the Federal Reserve is expected to cut rates. However, don't expect a return to the rock-bottom rates of the pandemic era.
The takeaway? The housing market is in a state of flux. While some buyers are on hold, waiting for rates to cool, others are diving in, taking advantage of the increased inventory. The coming months will be interesting, as the market settles into its new reality.
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