Home sales fell in June, but prices kept going up

Photo (c) krisanapong detraphiphat - Getty Images

Rising mortgage rates have cut into home affordability

With rising mortgage rates cutting into home affordability, sales of existing homes fell in June for the fifth straight month. But despite the decline, the median price of a home hit another record high.

The National Association of Realtors (NAR) reports that sales of all types of existing homes fell by 5.4% from May and were 14.2% lower than in June 2021.

"Falling housing affordability continues to take a toll on potential home buyers," said NAR Chief Economist Lawrence Yun. "Both mortgage rates and home prices have risen too sharply in a short span of time."

Despite the lack of buyers, sellers were able to get their asking price and more. NAR data shows that the median home sale price in June was $416,000. It was $406,000 in May and $366,900 in June 2021.

An average of 14 days on the market

Even though sales were down, homes spent less time on the market. In fact, the NAR said the average home spent only 14 days on the market last month – the shortest time since the organization began keeping records.

With fewer sales last month, there are slightly more homes now on the market. The inventory of available homes, which has been constrained for at least five years, increased to a three-month supply.

"Finally, there are more homes on the market," Yun said. "Interestingly though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers."

First-time buyers accounted for 30% of sales in June, an increase from 27% in May and down from 31% in June 2021. The NAR's 2021 Profile of Home Buyers and Sellers – released in late 2021 – reported that the annual share of first-time buyers was 34%.

All-cash sales – which usually means the buyer was an investor – accounted for 25% of June sales, the same share as in May and up from 23% in June 2021.

The housing market is shifting

Kathleen Murphy, an associate broker at Gibson Sotheby's International Realty in Boston, says the real estate market is at an inflection point.

“The market we have now is similar to the market at the beginning of the pandemic because that market created uncertainty and, for many, anxiety,” Murphy told ConsumerAffairs. “The difference is now consumers are uncertain about the increasing mortgage rates and out of control inflation and less about vaccine availability and hospitalization.”

Yun agrees that inflation is a wild card. If inflation continues on its current path, he says mortgage rates – now hovering just below 6% – will continue to rise.

"Rates will stabilize only when signs of peak inflation appear,” Yun said. "If inflation is contained, then mortgage rates may even decline somewhat."

Take a Home Warranty Quiz. Get matched with an Authorized Partner.