The lack of “for sale” signs has been an ongoing concern for house hunters since the COVID-19 pandemic, and despite a slight decline in demand, the supply side has not improved.
The National Association of Realtors data shows that the 1.1 million homes for sale marked the smallest total inventory for any July going all the way back to 1999 despite a slight 3.7% increase from the previous month. At the current sales pace, it would take 3.3 months to sell all the properties on the market, up from 3.1 months in June and 3.2 months one year ago, but a far cry from the five to six months required to reach a balanced inventory, according to experts.
In light of the lack of existing inventory, some buyers have turned to new construction instead and new home sales were at a seasonally adjusted annual rate of 714,000 in July, 4.4% above the revised June rate of 684,000 and 31.5% higher than the July 2022 estimate of 543,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). “For 17 months in a row, buyers have been able to select from an inventory of more than 400,000 new homes for sale nationwide, which is a high number historically,” says Holden Lewis, home and mortgage expert at NerdWallet. “And builders are responding to the home affordability crisis: In July, 40% of new houses were sold for less than $400,000. A year earlier, 33% cost less than $400,000.”
However, existing homes constitute the vast majority of the housing inventory. Sales of previously owned US homes fell in July to the lowest level since the start of the year, close to its slowest pace since 2010, decreasing 2.2% from a month earlier to a 4.07 million annualized pace.
Housing Unaffordability Continues
“Two factors are driving current sales activity—inventory availability and mortgage rates,” says NAR chief economist Lawrence Yun. “Unfortunately, both have been unfavorable to buyers.” The average 30-year fixed rate has pushed well above 7% to the highest level in more than two decades in recent weeks, while the median existing-home price for all housing types in July was $406,700, an increase of 1.9% from July 2022 at $399,000, leaving many potential buyers on the sidelines. Current homeowners are also thinking twice before putting their homes on the market as they are understandably reluctant to let go of their relatively affordable mortgages, which contributes to the chronic lack of inventory.
“Most homeowners continue to enjoy large wealth gains from recent years with little concern about home price declines,” Yun says. “However, many renters are concerned as they’re facing growing affordability challenges because of high interest rates.” First-time buyers were responsible for a mere 30% of sales in July, up from 27% in June and 29% in July 2022.
“Affordability is the biggest issue facing home buyers. A typical buyer’s principal-and-interest payment has more than doubled in four years,” says Lewis. “After a 20% down payment, someone buying the median-priced house in July 2019, at that month’s average mortgage rate, paid $1,041 a month in principal and interest. In July 2023, the monthly principal and interest was $2,130.”
We’ll keep you updated on further developments. In the meantime, if you’d like more information about buying/selling or refinancing in today’s market, give us a call or drop us an email.
