Summer Sales: Costs vs. Demand

From a National perspective, existing home sales have seen a slight moderation this summer, with higher mortgage rates and home prices prompting buyers to be more deliberate in their search. In July, existing home sales, which encompass single family homes, townhomes and condos, saw a 1.7% dip compared to June, yet managed a 0.7% increase year over year. However, looking at the year to date data, sales are actually up 2.4%, indicating a remarkable stability even with the recent climb in mortgage rates.

The primary challenge facing the housing market right now is the escalating cost of homeownership. Mortgage rates have been a significant factor, with the 30-year fixed rate mortgage averaging 6.54% in July and climbing to 6.69% by early August (a yearly high so far). Buyers aren't finding much relief on the price front either; the median sales price for an existing home in July was $434,100. While this was a slight decrease from June's record high of $440,600, it still represents a 2% increase compared to a year ago. In fact, roughly 80% of major metro areas tracked have seen home prices continue to rise in the second quarter.experiencing double-digit annual increases.

Sellers are becoming more mindful of pricing, with 20% of active listings seeing price reductions in July, yet homes are still going under contract faster than last year. Current homeowners are in a strong position, having accumulated significant housing wealth, about $128,000 on average over the past six years. Inventory remains limited across many markets, keeping sellers in an advantageous position and properties are selling quickly, with a median time on the market of just 29 days in July. First time buyers face a tough market without prior home equity, often needing to adjust their budgets. They made up 29% of sales in July, down from June but up from a year ago. Meanwhile, cash buyers, including investors and second home purchasers, continue to make up a substantial portion of the market, accounting for 26% of existing home sales.

Regionally, the Northeast is experiencing a surge in demand, being the only major region to see existing home sales increase by 2% in July compared to June, despite a 5.2% jump in median home prices year over year. The Midwest, while seeing a slight dip in sales last month, continues to perform well due to its relatively lower median home prices, where a $60,000 annual household income could be sufficient to buy a median-priced home. Looking at the specifics for July, the Northeast saw sales at an annual rate of 500,000, with a median price of $563,800. The Midwest had sales at 970,000, with a median price of $342,900. The South recorded sales at 1.86 million, with a median price of $371,700. The West's sales were unchanged at 730,000, with a median price of $622,200.

In summary, I think what stands out here is the resilience of the housing market, even as it navigates higher costs. While some buyers are taking a pause, the underlying demand and limited inventory are keeping prices firm and homes selling relatively quickly, especially in certain regions.