U.S. Home Prices Hit New Record of $416,000 in June as Sales Continued to Slide
The median existing home price hit another record in June, rising to $416,000, and sales declined for the fifth straight month as higher interest rates pushed more buyers out of the market.
Sales of previously owned homes fell 5.4% in June from the prior month to a seasonally adjusted annual rate of 5.12 million, the weakest rate since June 2020, the National Association of Realtors said Wednesday. June sales fell 14.2% from a year earlier.
The national median home price continued to climb, rising 13.4% in June from the previous year and increasing from a revised $408,400 in May.
Despite the higher prices, homes are still selling quickly. Properties remained on the market 14 days in June, the fewest in records going back to 2011. The inventory of homes for sale has increased but remains low with a three-month supply of unsold homes. Total inventory at the end of June stood at nearly 1.26 million units, a 9.6% increase from May.
“A combination of higher prices and higher mortgage rates have clearly shifted the dynamics in the housing market,” said
Lawrence Yun,
NAR’s chief economist. “People who want to buy are simply priced out given the affordability challenges.”
Economists surveyed by The Wall Street Journal had expected a 0.9% monthly decline in sales of previously owned homes, which make up most of the housing market.
The average rate on a 30-year fixed-rate mortgage was 5.51% in the week ended Thursday, up from 2.88% from a year earlier, according to housing-finance agency
Higher rates are weighing on demand. Mortgage applications fell for the third week in a row, hitting the lowest level since 2000, according to a separate release Wednesday by the Mortgage Bankers Association.
“Buyers can’t figure out what is the right price,” said
Mark Zandi,
chief economist at Moody’s Analytics. “Sellers are very reluctant to give up” on the price they expected to sell for a few months ago, he said.
Higher mortgage costs are in part a result of the Federal Reserve’s aggressive path of interest rate increases in an effort to tame inflation, which hit 9.1% in June, the highest in more than four decades. Fed officials moved up rates by three quarters of a percentage point in June, the largest increase since 1994. Officials will likely make a similar move at their meeting next week.
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Tighter Fed policy has pushed up borrowing costs across the board, particularly for mortgages. Last month, mortgage rates hit their highest point since 2008, before falling down slightly.
Almost 15% of home-purchase agreements that were pending in June fell through, the highest level since April 2020, when the Covid-19 pandemic disrupted the market, according to real-estate brokerage
Redfin Corp.
“We have a lot of people that are just sitting on the sidelines waiting to see what happens with interest rates and the overall economy,” said Phil Mount, a real-estate agent in Boise, Idaho. “People aren’t buying right now because they’re nervous.”
Higher interest rates and cooling sales have also weighed on home builders and depressed new construction.
Housing starts fell 2% in June to a seasonally adjusted annual rate of 1.56 million, the Commerce Department said Tuesday, the second consecutive decline. Residential permits, which can be a bellwether for future home construction, fell 0.6% in June from the prior month.
Builders are now focused on selling the homes they have already completed rather than building more, analysts said.
An index of builder confidence has fallen for seven straight months and in July stood at the lowest level since May 2020, the National Association of Home Builders said Monday.
Tuesday’s data on housing starts prompted several forecasters to downgrade their estimates for second-quarter economic growth. Economists at Goldman Sachs lowered their forecast by 0.1 percentage point to 0.6%.
economists now project a 0.7% growth rate in the second quarter, down from 0.8%.
In response to rising rates, some buyers are opting for adjustable-rate mortgages, which offer a lower interest rate in the early years of the loan, or are paying more up front to reduce their interest rates.
Eddie Doyle, 26 years old, used an adjustable-rate mortgage when he bought his first house in Fort Dodge, Iowa, for $167,500 in June. His mortgage carries a 3.625% interest rate for the first 10 years.
“I paid a little more for the house than I wanted to,” Mr. Doyle said. But “in this town…if it’s reasonably priced, it’s not sitting on the market for longer than a week.”
owner of the Journal, also operates Realtor.com under license from NAR.
Write to Nicole Friedman at nicole.friedman@wsj.com and David Harrison at david.harrison@wsj.com
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