Navigating the Current Housing Market: A Tale of Dwindling Supply and Rising Prices
The real estate market is witnessing a seismic shift. Sales of pre-owned homes in the United States have taken a tumble, with a noticeable 3.3% dip in June compared to May, according to the National Association of Realtors. The annualized rate now stands at a seasonally adjusted 4.16 million units, marking a stark 18.9% decrease compared to June of the previous year. This is the most sluggish pace for June since the throes of the financial crisis in 2009.
Such a downturn in the housing market isn't due to lack of demand but rather, a severe shortage of supply. As of June’s end, there were only 1.08 million homes up for sale - a significant 13.6% decrease from the previous year. With the current pace of sales, this equates to a mere 3.1-month supply, far short of the six-month supply seen as a balance between buyer and seller.
“The market can easily absorb a doubling of inventory,” notes Lawrence Yun, chief economist for the Realtors. Yet, the scarcity of homes for sale is applying relentless pressure on prices. June's median price for an existing home was a staggering $410,200 - the second-highest price ever recorded by the Realtors. Despite the fluctuating sales, home prices remain stable across most parts of the country.
The consequence of this market dynamic? A thriving sellers' market where one-third of homes are sold above the listing price, a rough reality for first-time buyers. They've seen their share of June sales tumble to 26%, the lowest since the Realtors started tracking this metric. In contrast, the high-end market is showing signs of revival.
An interesting development is the rising prevalence of all-cash sales, accounting for 26% of all June transactions. This trend, a byproduct of the ongoing competition, indicates that buyers are leveraging cash to win over sellers.
Even as the existing home market stagnates, new home sales are flourishing. The nation’s largest homebuilder, DR Horton, reported a significant 37% surge in new orders in its latest earnings release.
So, what does this imply for the average buyer or seller? It’s a clear indication that the housing market is undergoing significant changes driven by supply constraints, fluctuating mortgage rates, and changing buyer behaviors. Buyers, sellers, and investors need to stay informed and adaptable to navigate this dynamic landscape.
In a world where change is the only constant, understanding these trends can pave the way for informed decision-making and successful real estate transactions.
What are your thoughts?
-GZ
Source: https://www.cnbc.com/2023/07/20/june-home-sales-drop-to-the-slowest-pace-in-14-years.html