The National Association of Realtors Existing Home Sales Report, which measures closings on existing homes, showed that sales were down 5.4% month over month in June at a 5.12 million annualized pace. This was worse than expectations of a 3.4% decline. It’s important to look at the annualized pace comparatively speaking. The current pace is pretty much where housing across the country was when looking at pre-pandemic numbers. It is not much better or worse. Year over year, Existing Home Sales were down 14.2% from 2021. This is due to the fact that in 2021 there was a lot of activity making up for 2020.
Also, within the report, we saw that first-time homebuyers showed little change from 31% down to 30% year over year, but month over month they were up from 27% of transactions in the previous report to 30% of transactions. And when we take a look at the year-over-year number and consider that while home prices are up 20% and mortgage rates have risen, the first-time homebuyer market share is only down 1%, there is some resiliency to be seen.
On the inventory side, the current housing inventory is at 1.26 million homes for sale. That is up 2.4% from last year and 10% from last month. So, is there a major boom in inventory in the market? Is this unusual? The short answer is no. This is a normal occurrence that happens between late spring and early summer every year. Parents want their kids to start school at the beginning of the school year, so they have to get their houses on the market. Something else about inventory that is being overlooked is that even though there are 1.26 million existing homes in inventory, 641,000 are under contract. That’s 51% of inventory already off the market! The actual active listings or actual inventory is 619,000 homes!
With all of this data put together, it is still a strong housing market that has a lot of opportunities. While Existing Home Sales did come in softer than expected and the inventory boom that the media reports is not necessarily a boom whatsoever, it still speaks to the strength in home pricing and demand for homes. It’s simple economics 101 of supply and demand. With inventory being so low and the demand being so high, that is why home prices keep pointing higher.