Wednesday, July 26, 2023 / by Claudia Vieytes
The real estate market has faced unprecedented challenges recently, characterized by low inventory and soaring home prices. According to the National Association of REALTORS® (NAR) most recent existing-home sales report, sales in June 2023 fell by 3.3% to a seasonally adjusted annual rate of 4.16 million homes. This decline comes amidst a significant year-over-year sales contraction of 18.9%, reflecting a sharp drop from 5.13 million in June 2022.
Inventory Constraints and Price Trends
One of the primary factors contributing to the sales decline is the tight inventory situation. Total housing inventory remained steady at 1.08 million units, identical to May figures, but dropped by 13.6% compared to the previous year (1.25 million). Consequently, the unsold inventory currently sits at a 3.1-month supply at the current sales pace, indicating an increase from three months in May to 2.9 months in June 2022.
The median existing-home price for all housing types in June 2023 was $410,200, making it the second-highest price ever recorded. Although this figure is down 0.9% from the record-high of $413,800 seen in June 2022, the fact that the median price surpassed $400,000 for the third time demonstrates the ongoing price escalation in the market.
Market Dynamics and Sales Trends
Properties on the market are spending more time listed, with the median number of days remaining unchanged at 18 days, compared to May figures. However, this represents an increase from the 14-day median in June 2022. A notable trend is that 76% of homes are being sold within a month, indicating a high demand for available properties.
First-time buyers, although still significant contributors to the market, have seen their share of sales decline to 27% in June 2023, down from 28% in May and 30% in June 2022. NAR's 2022 Profile of Home Buyers and Sellers revealed that the annual share of first-time buyers was 26%, marking the lowest since the data started being tracked.
All-cash sales continue to make up a substantial portion of transactions, accounting for 26% of sales in June 2023, up from 25% in May 2023 and June 2022. Additionally, individual investors or second-home buyers often engage in cash transactions, and purchased 18% of homes in June 2023, a notable increase from 15% in May and 16% the previous year.
Distressed sales, including foreclosures and short sales, have remained relatively steady at 2% of sales in June 2023, almost unchanged from the previous month and the prior year.
The regional breakdown sheds light on how different parts of the country have been affected by these market dynamics:
- Northeast: Sales in the Northeast region saw a 2% growth to an annual rate of 510,000, but it remained down 21.5% from June 2022. The median price in this area increased by 4.9% from the prior year to $475,300.
- Midwest: Sales in the Midwest region remained unchanged at an annual rate of 990,000, declining by 19.5% from one year ago. The median price in the Midwest rose by 2.1% from the previous year to $311,800.
- South: The Southern region experienced a 5.4% decrease in sales to an annual rate of 1.91 million, down 16.2% from the previous year. The median price in the South dipped by 1.2% from the prior year to $366,600.
- West: Sales in the Western region declined by 5.1% to an annual rate of 750,000, plummeting 22.7% from one year ago. The median price in the West fell by 3.4% from the previous year to $606,500.
The current real estate landscape presents challenges and opportunities for buyers and sellers alike. Low inventory levels and high prices have contributed to a slowdown in sales, while all-cash transactions and investor activity have remained robust.
As we move forward, potential buyers must be prepared for competitive markets and know that properties may sell quickly and sometimes above the list price. Additionally, first-time buyers may need to navigate the current environment carefully, and real estate professionals can play a vital role in guiding them through the process.
For sellers, despite the market's competitive nature, the high median home prices indicate that there is still strong demand in many regions. However, it is essential to be realistic about pricing strategies and work closely with experienced agents to optimize sales opportunities.
Ultimately, staying informed about the latest market data and working with knowledgeable real estate professionals can empower buyers and sellers to make informed decisions in this dynamic and challenging market.