A game-changer is underway. Even the NAR concedes this “shift from a seller’s market to a buyer’s market.”
By Wolf Richter for WOLF STREET.
Mortgage rates have dropped to about 6.8%, down by a full percentage point from October last year, and yet sales of existing homes have plunged, and vacant homes for sale are coming out of the woodwork, the same vacant homes that the industry said didn’t exist, the second and third homes that people had moved out of but didn’t sell when they bought a new home over the past few years in order to ride the price spike all the way to the top. So now it’s time to sell those vacant homes. And supply in June spiked to the highest level in four years.
Sales of existing homes of all types – single-family houses, townhomes, condos, and co-ops – fell 5.4% in June from May on a seasonally adjusted basis, and also by 5.4% year-over-year to an annual rate of 3.89 million homes, the third-lowest sales volume since the depth of the Housing Bust in 2010, behind only October and December 2023, according to the National Association of Realtors (NAR) today.
“We’re seeing a slow shift from a seller’s market to a buyer’s market. Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis,” the NAR said in its report (historic data via YCharts):
Sales in June were down from the Junes in prior years by:
2023: -5.4%2022: -24.2%2021: -34.8%2019: -26.9%2018: -27.8%.
Not seasonally adjusted, and not annual rates, sales normally rise in June from May to form the seasonal sales peak in June after which sales decline through January.
But not this June. This June, actual sales fell from May, to 375,000 houses, condos, and co-ops.
Supply spiked to 4.1 months in June at the current rate of sales, the highest since May 2020, and just a hair below the Junes in 2019 (4.3 months), 2018 (4.2 months), and 2017 (4.2 months).
Inventory for sale jumped by 23.4% year-over-year, to 1.32 million homes, according to NAR data. At the same time, sales dropped 5.4% year-over-year. This surge in inventory combined with the drop in sales caused supply to spike by one-third year-over-year, to 4.1 months in June, from 3.1 months in June last year.
And normally, supply remains roughly stable or declines from May to June, but not this June. This June it spiked. There is a game-changer underway (historic data via YCharts):
Active listings surged by 36.7% year-over-year to 840,000 in June, just a hair below June 2020, according to data from Realtor.com.
But active listings didn’t surge equally across the country, as we saw when we discussed active listings in the largest 50 metros here. According to data from Realtor.com, active listings surged the most year-over-year in:
Tampa, FL, metro: +93%Orlando, FL, metro: +81.5%Denver, CO, metro: 78%San Diego, CA, metro: +72%Jacksonville, FL, metro: +70%Seattle, WA, metro: +62%Atlanta, GA, metro: +59%Phoenix, AZ, metro: +56%San Jose, CA, metro: +53%.
Price reductions continued to surge. Of the active listings, 37.6% had reduced prices in June, the highest share of reduced prices for any June, except June 2022, in the data from Realtor.com going back to 2016:
Median price was shifted up by the surge in sales of high-end homes.
According to the NAR, despite the 5.4% year-over-year decline in overall sales, sales of homes above $1 million actually rose year-over-year, the only price category where sales rose; sales in all other price categories fell. They fell the most in the price range below $750,000:
Sales of homes of over $1,000,000: +3.6% YoYSales of homes of $750,000 to $1,000,000: -1.9% YoYSales of homes of $500,000 to 750,000: -7.6%Sales of homes $250,000 to 500,000: -12.4%Sales of everything below also fell.
The change in mix was very pronounced in expensive markets that depend more on stock prices than on mortgage rates, where many high-end buyers – including those now riding the AI bubble – pay cash, often with funds either obtained from the sale of stocks, or borrowed against their stocks.
For example, the luxury market in the San Francisco Bay Area. Luxury is over $5 million. According to Compass’ luxury report for the San Francisco Bay Area:
“It is in the most affluent counties where high-tech industry is concentrated – and the centers of what is being described as the “AI boom” – that luxury home sales truly soared in Q2.”
San Francisco County and Santa Clara County (incl. San Jose) “saw year-over-year increases in $5-million+ home sales in Q2 2024 of 54% and 63% respectively.”
“The circle of seven extremely expensive communities circling Stanford University – on either side of the San Mateo/Santa Clara County line – saw a year-over-year Q2 increase of 92% in $10-million+ sales.”
“The most affluent households are typically much more affected by changes in stock markets – and in the Bay Area, by the soaring Nasdaq in particular – than by interest rates: Many of these buyers pay all-cash…. And, of course, many employees of companies such as Nvidia have suddenly become very wealthy indeed.”
But sales of homes requiring a mortgage have plunged in the US overall, as applications for mortgages to purchase a home have collapsed by nearly half from 2019:
The median price was pushed up by this change in the mix of sales, with a larger number of higher-end homes selling, and fewer mid-range and lower-end homes selling (here’s our explanation and illustration of how the median home price is skewed by changes in the mix).
The median price of single-family houses jumped to $432,700, amid this surge in sales of high-end homes. It thereby surpassed the prior high in June 2022 by 2.8%.
And there was a down-revision: The median price for May was revised down by $2,100 from the figure reported a month ago, nearly wiping out the record price proclaimed in May, putting it roughly on par with June 2022.
“Even as the median home price reached a new record high, further large accelerations are unlikely,” the NAR’s report stated today. “Supply and demand dynamics are nearing a balanced market condition. The months’ supply of inventory reached its highest level in more than four years.”
For seasonal reasons, the median price will fall for the rest of the year into early 2025, as it always does this time of the year. June marked the high point for 2024:
The median price of condos and co-ops rose to record $371,700, amid similar shifts in sales to the higher end of condos.
And there were revisions: the May condo price was revised down today from the originally reported $371,300 to today’s May figure of $368,900. So today’s June figure is essentially where May had been a month ago.
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