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The pace of existing home sales fell close to a record low in June as record-high prices and persistently high mortgage rates turned buyers away.
Data from the National Association of Realtors shows that sales slumped 5.4% from May to June, hitting an annualized rate of 3.89 million. That marks the one of the slowest paces since 2010.
Adding to the reluctance of buyers was a second straight monthly record for home prices. The median existing-home price surging 4.1% year-to-year to $426,900.
The two dynamics are combining to worsen a long-standing logjam in the housing market. While the issue was once a lack of inventory, home sales have stayed stagnant even as more units have come available. It's likely buyers are waiting for interest rates to start declining.
"Homes are sitting on the market a bit longer, and sellers are receiving fewer offers," NAR chief economist Lawrence Yun said in the report. "More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis."
According to Redfin, even those homebuyers who were ready to make the buy got cold feet: around 15% of home purchases under contract were canceled, the highest percentage on record for June.
Orlando, Jacksonville, and Tampa in Florida led these cancellations, the real estate firm said.
Low inventory continues to be the chief factor in price appreciation, though the reasons behind it are multi-pronged.
On one end, high mortgage rates have kept many would-be sellers off the market, meaning that buyers are more dependent on housing housing. But while construction enjoys its biggest boom in 16 years, builders are nowhere close to narrowing the demand deficit, Zillow said.
In fact, the agency reported in June that even if the US had no population growth, today's level of construction wouldn't be enough to fill the gap.
However, NAR said price spikes might soon start to moderate as the housing market gradually becomes more balanced.
"Even as the median home price reached a new record high, further large accelerations are unlikely," Yun said. "Supply and demand dynamics are nearing a balanced market condition. The months supply of inventory reached its highest level in more than four years."
A bigger catalyst could come once the Federal Reserve cuts interest rates, which markets are betting could happen as soon as September. When borrowing costs fall, elevated mortgage rates typically decline.
The pattern is already showing. With rate cut expectations abounding, the weekly 30-year mortgage rate has gradually slid from this year's highs. For the week ending Thursday, July 18, the rate stood at 6.77%, Freddie Mac shows.
