U.S. existing home sales unexpectedly declined in June as record-high home prices and elevated mortgage rates kept many buyers on the sidelines.
Sales of previously owned homes fell 2.4% last month to a seasonally adjusted annual rate of 4.09 million units, according to the National Association of Realtors. Economists polled by Reuters had expected sales to rise to 4.20 million units.
Regional Sales Show Mixed Results
The housing market showed different trends across the country.
Existing home sales increased in the Northeast. However, sales declined in the Midwest, South, and West.
Existing home sales are recorded when a contract closes. That means June’s figures likely reflect contracts signed in April and May.
Mortgage Rates Continue to Pressure Buyers
Mortgage rates have eased after rising sharply during the Middle East war. However, borrowing costs remain high compared with pre-conflict levels.
According to Freddie Mac data, the average rate on the popular 30-year fixed mortgage is still about 45 basis points above where it stood before the conflict.
This continues to weigh on affordability and limits the number of buyers able to enter the market.
Despite the monthly decline, existing home sales were still up 2.8% compared with June last year.
Buyers Remain Highly Sensitive to Affordability
Lawrence Yun, chief economist at the National Association of Realtors, said the uneven movement in monthly home sales shows how sensitive buyers are to affordability conditions.
Small changes in mortgage rates can quickly affect demand, especially when home prices are already at record levels.
Low Inventory Keeps Prices Elevated
Higher mortgage rates are also discouraging many homeowners from selling.
Many current homeowners still have fixed mortgage rates below 5%. As a result, they are reluctant to list their homes and take on a new loan at today’s higher rates.
Inventory of previously owned homes fell 0.6% to 1.56 million units. However, supply was still up 1.3% compared with a year earlier.
Housing Shortage Remains a Major Challenge
The U.S. continues to face a national housing shortage, especially for entry-level homes.
The National Association of Home Builders estimates the shortfall at around 1.2 million homes.
At June’s sales pace, it would take 4.6 months to clear the current supply of existing homes. That figure was unchanged from a year ago.
Limited supply continues to support high home prices across the market.
Congress Passes Housing Affordability Bill
Congress recently passed a bipartisan housing affordability bill aimed at easing pressure in the housing market.
The bill includes measures to restrict single-family homeownership by investment firms. It also seeks to waive or speed up environmental reviews for some construction projects.
However, President Donald Trump has declined to sign the bill until a separate voting bill is passed.
Median Home Price Reaches New Record
The median existing home price rose 1.8% from a year earlier to a record $440,600 in June.
First-time buyers made up 33% of sales, compared with 30% a year ago. However, analysts generally view a 40% share as more consistent with a healthy housing market.
Listed homes stayed on the market for a median of 28 days, up from 27 days a year earlier.
Distressed sales, including foreclosures, fell to 2% of total sales from 3% last year.
For now, the U.S. housing market remains under pressure from high prices, limited supply, and mortgage rates that continue to challenge affordability.
