Single-family home sales fall, cause market cool off

New single-family home sales fell 6.6% to a seasonally adjusted annualized rate of 676,000 in June, the third straight monthly decline, according to the Census Bureau. Additionally, May’s estimate was revised downward by 45,000 to 724,000. The number of new single-family houses for sale increased 7%, reaching the highest level since November 2008, though approximately 30% of homes for sale were homes that had not yet been started. The median sales price for new houses sold fell 5%, the largest monthly decline since April 2020.

A report by Redfin also shows a slowdown, with pending home sales at their smallest year-over-year increase at 7%. The supply of homes for sale rose while the number of newly listed homes for sale followed its slow seasonal decline.  

Home-sale prices are at 19%. Homes are still getting sold to buyers who are willing to purchase at a higher asking price and sellers are moving these homes within two weeks. 

The National Association of Realtors® Pending Home Sales Index, which records contract signings of existing homes and typically leads closings by one to two months, fell 1.9 percent to 112.8 in June.

Between online searches, in-person tours and paperwork, some buyers are tired of playing the waiting game.

Sellers likely noticed they don’t always hold the best cards. Asking prices dipped after its June peak. A growing number of sellers are figuring that out the hard way as 4.5% lowered their list price, the highest share since November 2019.

Redfin Chief Economist Daryl Fairweather said sellers will have to lower their expectations or they will miss out. 

“Many homebuyers have turned to the rental market amid such high home prices, but now with rental prices growing, I expect many will return to the housing market by spring of next year. The transition to this new slightly cooler phase of the housing market will happen unevenly depending on the location and the desirability of the home. If you are currently looking to buy a home, I recommend that you do your research on how much attention the home is getting before you put in your offer. If you find a home without any other offers, you may be able to get it for below the list price and with inspection and financing contingencies intact.”

What’s next?

According to a Fannie Mae forecast, combined with the decline in the pending home sales index, we believe demand for homes is likely normalizing somewhat following the pandemic-related surge. High prices may be driving some would-be homebuyers out of the market, and we believe many first-time buyers likely pulled forward their demand during the pandemic, leaving fewer potential first-time homebuyers currently than there would have been otherwise. However, we think ongoing supply constraints are also likely dragging on sales as builders have delayed breaking ground on projects, which is reflected in the share of homes for sale but not yet started hitting a record high at nearly 30%. The decline in sales was larger than we had anticipated, meaning our near-term forecast will likely be revised downward; however, we still expect a modest uptick in sales as supply constraints ease. We also expect that the continued low interest rate environment will likely prevent homebuying demand from slipping below pre-pandemic levels, though we continue to expect the dearth of affordable supply to weigh on the pace of sales going forward.

Other home buying insights 

  • 51% of homes that went under contract had an accepted offer within the first two weeks on the market, well above the 44% rate during the same period a year ago, but down 5.7 percentage points from the high point of the year, set during the four-week period ending March 28.
  • Pending home sales fell 12% from their 2021 peak hit during the four-week period ending May 30—a seasonal decline that’s to be expected but is slightly larger than the drop in years past. By comparison, pending sales dropped 8% during the same period in 2019.
  • From January 1 to July 27, home tours were up 18%, compared to a 45% increase over the same period last year, according to data from Showingtime

The housing frenzy seems to be turning into a more typical market.