The pandemic-era housing boom is showing signs of slowing, according to new data on previously owned homes released on Monday.
The median price for existing homes declined from an all-time record of $362,000 in June to $359,000 in July, which is still a 17.8% increase from when the United States was mired in the thick of the COVID-19 pandemic a year prior. Existing home sales also rose 2% from the prior month to a seasonally adjusted 5.99 million units, according to the National Association of Realtors.
“The housing market went through a big swing during the COVID lockdown. Once the economy reopened, now the sector appears to be settling down,” said Lawrence Yun, NAR’s chief economist, after the results were announced on Monday.
The inventory of unsold homes increased 7.3% to 1.32 million from June to last month, which is equivalent to 2.6 months of the monthly sales pace, the NAR said in a news release.
Yun pointed out that there are more homes for sale now than there were a couple months ago, which adds to the notion that while the housing market is still hot, it is cooler than it has been during the peak of the boom.
“We see inventory beginning to tick up, which will lessen the intensity of multiple offers,” Yun said. “Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available.”
While still high, the 17.8% year-over-year gain in prices seen in July is less than the 20%-25% year-over-year increases seen earlier this year, and it is an encouraging sign that the market appears to be slowing a bit.
Throughout the pandemic, demand for housing towered over the supply of new and existing homes and caused prices to mushroom as the seller’s market only intensified. Homes have become less affordable to potential buyers as wage inflation has not kept pace with the booming prices of new and existing homes.
NAR’s director of housing and commercial research, Gay Cororaton, told the Washington Examiner after the report was released on Monday that while affordability is still suffering, the numbers indicate that things are beginning to slow, which might not be great for sellers but is good for the overall health of the housing market.
She said that other signs of cooling are that real estate agents are reporting slower sales and are reporting less than five offers a house, compared to more than five offers one or two months ago. She also highlighted that the supply of existing home sales is improving and that there are now 2.6 months’ worth compared to the beginning of the year when the U.S. had just about 1.9 months’ worth.
Another factor influencing the housing market is inflation, which has become a clear side effect of the U.S. economic recovery. Inflationary pressures have grown far beyond the expectations of the Federal Reserve, many economists, and the Biden administration.
Consumer prices increased 5.4% in the year ending in July, according to the most recent report from the Department of Labor. The figure was slightly higher than expectations but less pronounced than the mammoth price increases seen over the previous few months.
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Original Author: Zachary Halaschak
Original Location: Housing market appears to be 'settling down' as pandemic drags on