June was a record-breaking month for the housing industry as the median existing-home price rose to $363,300. The month’s sales also rose 22.9% from a year earlier. Existing-home sales rose the most month-over-month in the Midwest, up 3.1%, and in the Northeast, up 2.8%. Along with these numbers, the number of first-time applications has increased as well.
Sales were especially strong at the high end of the market, as homes that were priced at more than $1 million more than doubled in June compared with a year earlier, according to the National Association of Realtors (NAR).
Despite the record high in June, there has been a slight shift. Homes sold in June received four offers on average, while the average in May was five offers, according to Lawrence Yun, NAR’s chief economist. The market is also easing since the high home prices are prompting homeowners to list their homes for sale.
The number of homes for sale is lower than normal, and the increasing demand due to low mortgage-interest rates is expected to continue pushing home prices higher.
Homes that come on the market are quickly purchased, according to Robert Frick, corporate economist at Navy Federal Credit Union.
“Demand is trumping everything,” Frick said. “Higher inventory isn’t going to take the brakes off price increases.”
Many homes right now are selling above listing price and receiving multiple offers. The typical home sold in June was on the market for a record-low 17 days, according to NAR.
At the end of June, there were 1.25 million homes for sale, which is up 3.3% from May and down 18.8% from June 2020. At the current sales pace, there was a 2.6-month supply of homes on the market at the end of June.
Those who watch the market closely expect the “housing frenzy” to cool in the next few months, especially as the number of homes for sale increases and high prices force some buyers out of the market.
Despite the boost of first-time applications, first-time buyers (or those who can only afford small down payments) are actually struggling the most to compete. More than half of existing-home buyers in June who used mortgages to buy a property put at least 20% down, according to a NAR survey. In order to stand out, some buyers have also agreed to buy houses without contract terms that typically protect buyers, such as inspection requirements.
Building activity has increased due to the strong demand, but home builders are limited by labor availability, land supply and material costs. A measure of U.S. home-builder confidence declined in July, the National Association of Home Builders said this week.
Housing starts, a measure of U.S. home-building, rose 6.3% in June from May, the Commerce Department said earlier this week. Residential permits, which can be a bellwether for future home construction, fell 5.1%.