The latest data brings rays of hope for housing as experts report that the U.S. housing market may be turning a corner on inventory. Sales are up slightly and sellers are starting to return to the market.
With a slight improvement in the supply situation, existing home sales rose 1.4% in June, after four straight months of decline. Sales were also up 22.9% from a year ago.
“Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales,” noted NAR chief economist Lawrence Yun. “Home sales continue to run at a pace above the rate seen before the pandemic.”
Pending home sales dipped slightly in June (-1.9%) after a big 8% gain in May. Signings were up in the Midwest and Northeast compared to the previous month with the Northeast also achieving the only year-over-year gain.
The median home price continued its ascent in June to $363,300, up 23.4% versus 2020 for 112 straight months of year-over-year gains and for the second-highest level recorded since January 1999.
Interestingly, investors are ramping up the competition for homebuyers, accounting for 14% of all sales in June, up from 9% a year ago. And all-cash purchases, which are largely investors, increased to 23% of sales.
The Supply Situation
Housing inventory opened up slightly in June: up 3.3% from May to 1.25 million units with unsold inventory also up to a 2.6-month supply. Properties continue to average 17 days on the market with 89% sold in less than a month.
“The uptick in new listings offers a ray of hope for buyers trying to find a home and lock in still-low mortgage rates. With the public widely in agreement that now is a good time to sell, we may see even more new sellers in the coming weeks and the end of inventory declines before we finish out the year,” predicts Realtor.com chief economist Danielle Hale.
Housing starts were down 5.1% in June but up 23.3% from June 2020 for an adjusted annual rate of 1,598,000 units.
“With limited construction capacity, builders report that their cycle time — the time it takes to build a house — has been elongated considerably,” according to housing analyst Ted Wilson. “Challenges with the construction supply chain have compounded the situation.”
With rising construction and labor costs an ongoing challenge, many builders are not releasing homes for sale until costs are closer to being finalized.
“Builders are competing with each other for labor to get the houses built,” Wilson continued. “There is no question that capacity has grown some, but not quickly enough to meet demand.”
Mortgage rates continue to hover around 3%. A 30-year fixed mortgage was 2.99% in early June and 3.02% by the end of the month. Mortgage applications were down 1.8% at the end of June, reaching the lowest level since the beginning of 2020.
According to Mortgage Bankers Association (MBA) economist Joel Kan, “Swift home-price growth across much of the country, driven by insufficient housing supply, is weighing on the purchase market and is pushing average loan amounts higher.”
Experts do not predict any major change in the pricing situation as we move toward fall.
“At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year,” Yun said. “Ideally, the costs for a home would rise roughly in line with income growth, which is likely to happen in 2022 as more listings and new construction become available.”
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