Home sales in June fall to their slowest pace in 14 years as shortages choke the market

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House sales in June were 18.9% lower than last year. This is the slowest sales pace for June since 2009.

"There just aren't enough houses for sale," said Lawrence Yoon, the brokerage's chief economist.

Sales of previously owned homes fell 3.3% in June compared to May, at a seasonally adjusted annual rate of 4.16 million units, according to the National Association of Realtors.

Compared to June last year, sales were 18.9% lower. This is the slowest sales pace for June since 2009.

The ongoing weakness in the housing market is not due to a lack of demand. It's all about critical supply shortages. There were only 1.08 million homes for sale at the end of June, 13.6% less than in June 2022. At the current rate of sales, this represents 3.1 months of supply. A six-month supply is considered balanced between buyer and seller.

"There just aren't enough houses for sale," said Lawrence Yoon, the brokerage's chief economist. "The market can easily absorb a doubling of inventory."

This dynamic keeps pressure under house prices. The median price of an existing home sold in June was $410,200, the second highest price ever recorded by realtors. The price last June was the highest, but barely 1%. This median index, however, also reflects what is selling, and right now, with mortgage rates much higher than last year, the low end of the market is the most active.

"Home sales are down, but home prices have held up in most parts of the country," Yoon said. "Limited supply still leads to situations of multiple offers, when a third of the houses were sold above the list price in the last month."

Sales are unlikely to recover anytime soon as mortgage interest rates weigh on affordability. Realtors measure June sales based on closings, so contracts likely signed in April and May. Mortgage rates were in the mid-6% range during that time, then rose to over 7% right at the end of May. Rates remained in the 7% range throughout June as home prices rose.

First time buyers have the hardest time. Their share of sales in June fell to 26%, down from 30% in June 2022. This is the lowest share since brokers began tracking this metric.

However, the high end of the market appears to be recovering. While sales were down at all price points, they were down least at the higher end. That wasn't the case last year, when higher-priced home sales fell sharply.

As competition heats up, buyers are increasingly using cash to win over sellers. Cash sales accounted for 26% of transactions in June, slightly higher than May and June last year.

Sales are not expected to rebound anytime soon in the existing home market, but sales of newly constructed homes are reaping the rewards. The nation's largest homebuilder, DR Horton, reported a big jump in new orders in its latest earnings release on Thursday.

"Despite the continued rise in mortgage rates and inflationary pressures, our net sales orders increased 37% from the same quarter last year, as the supply of new and existing homes at reasonable price points remains limited and the demographics supporting housing demand remain positive," said Donald Horton, chairman of the board, in a statement.