Existing home sales tumble 5.4% in June as prices hit another record high
Economists expected sales of previously owned homes to decline 0.6% in June
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U.S. existing home sales dropped to a fresh two-year low in June as rising mortgage rates and the relentless increase in home values slowed activity by edging prospective homebuyers out of the market.
Sales of previously owned homes tumbled 5.4% in June from the previous month to an annual rate of 5.12 million units, the lowest level since June 2020, according to new data released Wednesday by the National Association of Realtors. It marks the fifth consecutive month that sales have declined. On an annual basis, home sales plunged 14.2% in June.
The slowdown in sales came as the national median home price surged higher in June, hitting a new record of $416,000. That's up 13.4% from the previous year and is an increase from a revised $408,400 in May.
"Falling housing affordability continues to take a toll on potential home buyers," NAR chief economist Lawrence Yun said. "Both mortgage rates and home prices have risen too sharply in a short span of time."
HOUSING STARTS IN JUNE PLUNGE TO LOWEST LEVEL IN 9 MONTHS
A for sale sign stands in front of a house, Tuesday, Oct. 6, 2020, in Westwood, Mass. ( (AP Photo/Steven Senne) / AP Newsroom)
Economists surveyed by Refinitiv expected a 0.6% monthly decline in sales of previously owned homes, which make up the bulk of the housing market.
There were about 1.26 million homes for sale at the end of June, according to the report, an increase of 2.% from one year ago. It is the first annual gain in three years. At the current pace of sales, it would take roughly three months to exhaust the inventory of existing homes – up from 2.6 months one year ago. Experts view a pace of six to seven months as a healthy level.
The interest rate sensitive housing market has started to cool noticeably in recent months as the Federal Reserve moves to tighten policy at the fastest pace in three decades. Policymakers already approved a 75-basis point rate increase in June and are expected to approve another of that magnitude at the end of July.
Houses in the Harris Ranch community of Boise, Idaho, US, on Friday, July 1, 2022. (Jeremy Erickson/Bloomberg via Getty Images / Getty Images)
Following the rate hikes, the average rate on a 30-year fixed mortgage – the most popular among new homeowners – climbed to nearly 6% in June, though they've since moderated. The average rate for a 30-year fixed rate mortgage hovered around 5.51% for the week ending July 14, according to recent data from mortgage lender Freddie Mac.
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That is significantly higher than just one year ago, when rates stood at 2.88%.