On the surface, June’s housing data seems to follow familiar trends: existing home sales are down while median home prices have reached a record high. However, a closer look reveals a more optimistic outlook for buyers. This shift has prompted one of the leading housing economists to describe it as a “slow shift from a seller’s market to a buyer’s market.”
Are we seeing the first signs of a slow shift to a seller’s market?
Total housing inventory climbed to 1.32 million units at the end of June, up 3.1% from the previous month’s end, and 23.4% increase year-over-year, according to data from the National Association of Realtors (NAR), released in their monthly Existing-Home sales report. Homes also spent an average of 22 days on market, up from 18 days on market the previous year.
“Homes are sitting on the market a bit longer and sellers are receiving fewer offers,” said Lawrence Yun, the chief economist at NAR. “More buyers are insisting on home inspections and appraisal and inventory is rising nationally.”
The slow pace of sales is evident in the inventory numbers. Total existing-home sales declined 5.4% from May, reaching a seasonally-adjusted annual rate of 3.89 million in June.
The same report says the median existing-home price for all housing types reached $426,900, an all-time high and a signal that housing affordability continues to deteriorate in the wake of the post-pandemic housing boom. Despite that increase, Yun believes the rate of acceleration has peaked, and home prices will continue to move at a more normalized, steady pace.
What’s going on with mortgage rates?
The average 30-year fixed-rate mortgage dropped to its lowest level since March, according to data from Freddie Mac, which tracks mortgage rates with a weekly report. The average rate has been under 7% since the end of May, reaching as low as 6.7% for the week ending July 18.
Jerimiah Taylor, Movoto’s Chief Real Estate Officer
“If you’re watching the headlines, since September of 2021, mortgage interest rates have steadily climbed with the fastest 30-day mortgage rate increase in history in September 2021,” Jerimiah Taylor, the Chief Real Estate Officer at Movoto said. “Over the last 10 weeks they have incrementally gotten a little better every day.”
The consensus expectation is that the Federal Reserve will cut interest rates in September, supported by multiple indicators that inflation has cooled. However, those hoping for a swift return to all-time-low mortgage rates shouldn’t get their hopes up. According to Taylor, a rate cut is already factored into current expectations.
“There’s already a lot of this priced in — that people think the Fed is going to cut in September,” Taylor said.
The impact won’t be totally nominal, Taylor explained. The actual rate cut will create more certainty, closing the spread between 10-year Treasury Yield and the 30-year fixed-rate mortgage, which is higher than normal due to uncertainty in the market.
More new homes are being finished, but fewer are starting to be built
One of the biggest future indicators of housing inventory is the U.S. Census Bureau’s new residential construction data, which reported privately-owned housing completions were up 15.5% year-over-year in June.
But two of the more forward-looking indicators showed annual declines, according to the data. Privately-owned housing competitions were down 4.4% year-over-year in June and building permits were down 3.1% year-over-year.
