By Nathalie Voit

Sales of previously owned homes declined by 5.4% in June as housing prices reached a new record high and mortgage rates continued their sharp upward trajectory.

According to a monthly report from the National Association of Realtors (NAR) released on July 20, sales of existing properties in June dropped for the fifth consecutive month to a seasonally adjusted annual pace of 5.12 million. Transactions were down a staggering 14.2% from last June.

NAR Chief Economist Lawrence Yun said the cooldown in housing demand could be traced to a combination of high interest rates and sky-high home prices:

“Falling housing affordability continues to take a toll on potential home buyers. Both mortgage rates and home prices have risen too sharply in a short span of time,” he said.

The sales slump has led to a slight uptick in inventory.

According to the report, 1.26 million unsold properties were registered at the end of June. That is an increase of 9.6% over the previous month and 2.4% from one year ago when the supply of available homes for sale was just 1.23 million.

At the current sales pace, total housing inventory will be exhausted in three months. Although low, supply is gradually improving.

Nonetheless, the market remains tight. The average U.S. home sold for a record $416,000 last month, up 13.4% from one year ago. That is the highest median existing-home sales price ever recorded in the U.S.

Properties also continued to be snagged at a record pace, staying on the market for just 14 days. That is down from 16 days in May and 17 days in June 2021. About nine in ten homes (88%) sold in June remained on the market for less than one month.

The “record-low pace of days on market” paints a mixed picture of homebuyer demand. While there are more homes up for sale, homes priced too high are deterring potential buyers. On the other hand, homes priced right are selling very quickly, Yun noted.  

Although sales activity remains mixed for now, experts predict that rising mortgage rates will soon crowd out would-be-homeowners out of the market.

“Based on trends at this stage in the housing and business cycle, I expect affordability to be the bigger driver than availability moving forward,” Chief Economist at Realtor.com Danielle Hale said.