NAR Existing-Home Sales Report Shows 2.7% Decrease in June

U.S. existing-home sales declined 2.7% month-over-month in June to a seasonally adjusted annual rate of 3.93 million, though sales remained unchanged year-over-year. Despite this, the median existing-home price reached a record high of $435,300, up 2% year-over-year, primarily due to persistent housing undersupply. NAR Chief Economist Lawrence Yun highlighted that elevated mortgage rates are suppressing sales, but projected a potential increase in activity and first-time buyer entry if rates ease in the latter half of the year.

Analysis

The U.S. housing market in June demonstrated a clear divergence between transaction volume and pricing, a trend driven by affordability constraints and persistent inventory shortages. Existing-home sales fell 2.7% month-over-month to a seasonally adjusted annual rate of 3.93 million, remaining flat year-over-year and confirming that activity is stalled at cyclical lows due to elevated mortgage rates, which stood at 6.75%. Despite this transactional weakness, the median existing-home price climbed 2.0% year-over-year to a record high of $435,300, marking the 24th consecutive month of annual price gains. This price resilience is attributed to a structural undersupply, with total housing inventory at a tight 4.7-month supply, even though it has increased 15.9% from the previous year. The buyer profile reveals a market increasingly reliant on non-rate-sensitive participants, as all-cash sales rose to 29% of transactions, while the share of individual investors and second-home buyers dropped to 14%, its lowest level since September 2022. The National Association of REALTORS® outlook is conditionally optimistic, suggesting that a potential decline in mortgage rates in the second half of the year could unlock pent-up demand and boost sales activity across the country.

Key Decisions for Investors

• Investors should closely monitor leading indicators for mortgage rates, as the report explicitly identifies rate declines as the primary catalyst needed to reinvigorate transaction volumes in housing and related sectors.
• The persistent undersupply and record-high prices suggest continued strength for assets tied to home values, such as homebuilders and residential REITs, even as sales volumes remain suppressed.
• The notable retreat of individual investors and the concurrent rise in cash transactions indicate a shift in market composition, potentially reducing speculative froth but also capping near-term growth in transaction-dependent businesses like brokerages and mortgage originators.
• Given the regional disparities in year-over-year sales performance, with growth in the Midwest and South but declines in the Northeast and West, a geographically targeted investment approach is more prudent than relying on national averages.