Housing inventory slowly coming back as frenzy fades

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Written by Tim Glaze

After four consecutive months of declines, existing home sales increased in June, jumping 1.4% from May to a seasonally adjusted annual rate of 5.86 million, according to the National Association of Realtors. You can thank a rise in housing inventory for the gains.

Sales climbed 22.9% year over year, up from 4.77 million in June 2020 as housing inventory has slowly improved in recent months. Total housing inventory at the end of June amounted to 1.25 million units, up 3.3% from May’s inventory and down 18.8% from one year ago.

“That’s due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales,” said Lawrence Yun, NAR’s chief economist. “Home sales continue to run at a pace above the rate seen before the pandemic.”

Unsold housing inventory sits at a 2.6-month supply at the current sales pace, Yun said — also up from May’s 2.5-month supply.

The median existing-home price for all housing types in June was $363,300, up 23.4% from June 2020 ($294,400), as every region recorded price jumps. This marks a staggering 112 straight months of year-over-year gains.

“At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year,” Yun said.

“Ideally, the costs for a home would rise roughly in line with income growth, which is likely to happen in 2022 as more listings and new construction become available.”

Properties typically remained on the market for 17 days in June, unchanged from May and down from 24 days in June 2020. Eighty-nine percent of homes sold in June 2021 were on the market for less than a month. First-time buyers accounted for 31% of sales in June, also even with May but down from 35% in June 2020.

“The combination of low mortgage interest rates, an improving economy and demographic factors continues to stoke buyer demand and fuel market competition,” said Matthew Speakman, Zillow economist. “But historic price growth nationwide has weakened some households’ ability to afford their next home and a shortage of available inventory appears to have left some would-be buyers discouraged.”

Individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in June, down from 17% in May and up from 9% in June 2020. All-cash sales accounted for 23% of transactions in June, even with May and up from 16% in June 2020.

“Huge wealth gains from both housing equity and the stock market have nudged up all-cash transactions, but first-time buyers who need mortgage financing are being uniquely challenged with record-high home prices and low inventory,” Yun explained. “Although rates are favorably low, these hurdles have been overwhelming to some potential buyers.”
Single-family home sales decreased to a seasonally adjusted annual rate of 5.14 million in June, up 1.4% from 5.07 million in May and up 19.3% from one year ago. The median existing single-family home price was $370,600 in June, up 24.4% from June 2020.

Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 720,000 units in June, up from 710,000 in May and up 56.5% from one year ago. The median existing condo price was $311,600 in June, an annual increase of 19.1%.

Interest in condos, specifically, seems to be rising, as June saw the average condo sales price rise to 0.7% above asking. Nearly 42% of condos sold above asking price in June — more than double the 18.6% share in June 2020 and the 20.2% share in June 2019.

May’s average sale price of condos was also above asking price.

Regionally, existing-home sales in the Northeast increased 2.8% in June, recording an annual rate of 740,000, a 45.1% rise from a year ago. The median price in the Northeast was $412,800, up 23.6% from June 2020.

Existing-home sales in the Midwest rose 3.1% to an annual rate of 1,330,000 in June, an 18.8% increase from a year ago. The median price in the Midwest was $278,700, an 18.5% increase from June 2020.

Existing-home sales in the South were unchanged from May, posting an annual rate of 2,590,000 in June, up 19.4% from the same time one year ago. The median price in the South was $311,600, a 21.4% climb from one year ago. Existing-home sales in the West rose 1.7%, registering an annual rate of 1,200,000 in June, a 23.7% jump from a year ago. The median price in the West was $507,000, up 17.6% from June 2020.

“Plenty of buyers remain in the market, hoping to find a home that is a good fit for their needs and budget,” said Danielle Hale, Realtor.com chief economist. “Despite public opinion that it’s not a great time to buy, many home shoppers are looking to take advantage of still-low mortgage rates and lock in their monthly housing payment, the largest budget
item for many households.”