The housing market appears to be slowing down.
According to a report from the National Association of Realtors, sales of existing homes (which include single-family homes, townhomes, condominiums, and co-ops) increased by 2% in July over the previous month, marking the second month in a row of gains.
In July, the number of available houses for sale increased slightly, easing some of the pressure on buyers. While home prices increased year over year, they did not reach recent highs, according to the report.
“There has been a turn in the market from super heated to still very strong,” said Lawrence Yun, NAR’s chief economist.
Home prices have risen in recent months due to a lack of available inventory, but Yun believes the situation is improving slightly. According to the National Association of Realtors, the inventory of unsold homes increased 7.3 percent from June to July, but it was still down 12 percent from a year ago. At the current sales rate, unsold inventory has a 2.6-month supply. A 6-month supply of homes is considered a balanced market.
“We see inventory beginning to tick up, which will lessen the intensity of multiple offers,” said Yun. “Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available.”
In July, the median price of an existing home was $359,900, up 17.8% from a year ago and marking 113 months of year-over-year increases. However, the July price increase is lower than the 20 percent or more increases seen in the market over the previous year.
Cash purchases, on the other hand, remained strong, according to the report. In July, all-cash sales accounted for 23% of transactions, the same as the previous month and up from 16% a year ago.
“Although we shouldn’t expect to see home prices drop in the coming months, there is a chance that they will level off as inventory continues to gradually improve,” said Yun.
However, many people are still priced out. First-time buyers are still struggling in this market, and as they give up on buying, rental rates are rising, according to Yun. In July, 30 percent of first-time buyers purchased a home, down from 31 percent in June and 34 percent in July 2020.
Low mortgage rates continue to be an important factor helping prospective homebuyers, said Danielle Hale, Realtor.com chief economist.
“Despite the ongoing challenges of today’s housing market, including limited inventory, lightning fast home sales and competition from investors with deep pockets, many buyers are finding ways to persist until they find and close on a home,” said Hale.
Nonetheless, she claims that many potential buyers are debating whether or not to put their search on hold. However, they should be aware, according to Hale, that the competition usually takes a break in the fall.
“Although we didn’t see this sweet spot last fall as buyers were making up for time lost to lockdowns, there are signs that we’ll see it this year,” she said.
According to anecdotal reports from NAR member agents, fewer homes are selling for more than the asking price than earlier this year, and bidding wars are less intense.
He anticipates an inflection point this year, when inventory will be higher than the previous year.