Housing Market Sees Little change as Mortgage Rates hover Near 7%
The U.S. housing market is experiencing a period of stagnation, with home sales and prices showing minimal fluctuation as average 30-year mortgage rates remain anchored close to 7%.This stability, or lack of significant movement, is largely attributed to the persistent affordability challenges that continue to sideline many potential first-time homebuyers.
Homes that went under contract in May and June, the period influencing last monthS sales, were subject to average 30-year mortgage rates that ranged between 6.76% and 6.89%. According to mortgage buyer Freddie Mac, these rates have been remarkably consistent. Experts suggest that a notable increase in home sales would likely require a more significant drop in mortgage rates. For instance, an estimated fall to 6% could stimulate sales by an additional half-million homes.
The current market conditions are notably impacting aspiring first-time homebuyers. Thay represented 30% of home sales last month, a figure unchanged from May and considerably lower than the past average of 40%. Conversely, buyers with the financial capacity to purchase at current rates or pay in cash are finding more options available, as inventory levels have increased.
At the close of last month, there were 1.53 million unsold homes on the market, a slight decrease of 0.6% from May but a notable increase of nearly 16% compared to June of the previous year. Despite this year-over-year growth, the total number of homes for sale remains below the pre-pandemic norm of approximately 2 million. The current inventory translates to a 4.7-month supply at the prevailing sales pace, a marginal increase from 4.6 months in May and up from 4 months in June last year. A balanced market, typically considered to have a 5- to 6-month supply, has not yet been reached.
Homes are also spending more time on the market before selling, with properties averaging 27 days before finding a buyer last month, up from 22 days in June of the prior year. This extended market time is contributing to a trend where a higher percentage of listings are experiencing price reductions. In June, 20.7% of homes for sale had their prices reduced, marking the highest share for that month since at least 2016, according to Realtor.com. Tho, an increasing number of sellers are choosing to remove their properties from the market altogether rather than accept lower prices, with the number of unsold homes taken off the market jumping 47% in May compared to the previous year.