US existing home sales unexpectedly fell in June as house prices hit a record high and mortgage rates remained elevated, pushing potential buyers to the sidelines.
Home sales dropped 2.4% last month to a seasonally adjusted annual rate of 4.09 million units, the National Association of Realtors said on Thursday. Economists polled by Reuters had forecast home resales would climb to a rate of 4.20 million units.
Sales increased in the Northeast, but declined in the Midwest, South and West.
Existing home sales are counted at the closing of a contract. Last month’s sales likely reflected contracts signed in April and May. Though mortgage rates have retreated after surging in response to the war in the Middle East, the average rate on the popular 30-year fixed-rate mortgage remains about 45 basis points above its pre-conflict level, data from mortgage financing firm Freddie Mac showed.
Home sales increased 2.8% on a year-over-year basis in June.
“The back-and-forth in monthly home sales activity, driven by mild fluctuations in mortgage rates, shows how sensitive home buyers are to affordability conditions,” said Lawrence Yun, the NAR’s chief economist.
Higher mortgage rates are discouraging potential sellers from listing their homes. Many homeowners have mortgages with fixed rates below 5%. The inventory of previously owned homes on the market fell 0.6% to 1.56 million units. Supply increased 1.3% from a year ago.
There is a national housing shortage, especially for entry-level homes, with the National Association of Home Builders estimating the shortfall at about 1.2 million.
At June’s sales pace, it would take 4.6 months to exhaust the current inventory of existing homes, unchanged from a year ago. The housing shortage is keeping house prices elevated.
Congress recently passed a bipartisan housing affordability bill, which includes measures to restrict single-family homeownership by investment firms and waive or speed up environmental reviews for construction projects.
President Trump has declined to sign the bill until a separate voting bill is passed.
The median existing home price last month increased 1.8% from a year ago to a record-high $440,600.
First-time buyers accounted for 33% of sales, up from 30% a year ago. A 40% share in this category is needed for a robust housing market.
The median number of days on the market for listed properties rose to 28 from 27 a year ago. Distressed sales, including foreclosures, slipped to 2% from 3% last year.