U. S. Home Sales Fall 2.7 In June Amid Record Prices

Published in House and Home on Saturday, August 2nd 2025 at 22:25 GMT by Forbes
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Several years of undersupply are the driving factor behind the record home prices, which reached a median of $435,000 last month.

U.S. Home Sales Slid 2.7% In June As Prices Reach All-Time High

In a continued sign of strain within the American housing market, existing home sales in the United States experienced a notable decline in June, dropping by 2.7% from the previous month. This downturn comes even as median home prices soared to unprecedented levels, underscoring the persistent challenges facing both buyers and sellers in an environment marked by elevated interest rates and limited inventory. The data, released by the National Association of Realtors (NAR), paints a picture of a market that remains stubbornly unbalanced, with affordability issues pushing many potential homebuyers to the sidelines while sellers hold out for top dollar.

The seasonally adjusted annual rate of existing home sales fell to 3.89 million units in June, down from a revised 4.00 million in May. This represents not only a monthly decline but also a year-over-year drop of 5.4% compared to June 2024, when sales stood at 4.11 million. The slowdown is part of a broader trend that has seen sales activity languish near historic lows, reminiscent of the sluggish periods during the Great Recession. Economists attribute this to a combination of factors, including stubbornly high mortgage rates that have hovered around 7% for much of the year, making borrowing more expensive and deterring first-time buyers in particular.

Despite the dip in sales volume, home prices have shown no signs of cooling off. The median existing-home price climbed to a record $426,900 in June, marking a 4.1% increase from the same month a year earlier. This surge continues a streak of all-time highs, with prices now having risen for 12 consecutive months on a year-over-year basis. In fact, June's median price eclipsed the previous record set in May, highlighting the relentless upward pressure on housing costs driven by a severe shortage of available homes. Inventory levels, while slightly improved, remain critically low at just 1.32 million homes for sale at the end of June—equivalent to about 4.1 months of supply at the current sales pace. This is up from 3.7 months in May but still far below the 5-6 months typically associated with a balanced market.

Breaking down the data regionally, the sales decline was not uniform across the country. The Northeast saw a modest increase in sales, up 4.2% month-over-month to an annual rate of 500,000 units, though this was still down 3.8% from a year ago. In contrast, the Midwest experienced a 1.6% drop to 920,000 units, with a year-over-year decline of 6.1%. The South, which accounts for the largest share of the market, saw sales fall 3.1% to 1.79 million units, down 5.8% annually. The West bore the brunt of the slowdown, with a 5.6% monthly decrease to 680,000 units, representing a 7.0% drop from June 2024. These regional variations reflect differing economic conditions, with areas like the Northeast benefiting from stronger job markets and population inflows, while Sun Belt states grapple with overbuilding concerns and insurance cost spikes due to natural disasters.

High mortgage rates remain a primary culprit in the market's malaise. The average 30-year fixed-rate mortgage stood at 6.89% in June, according to Freddie Mac, a level that has more than doubled from the sub-3% rates seen during the pandemic-era boom. This has dramatically increased monthly payments for buyers; for instance, on a $426,900 median-priced home with a 20% down payment, the monthly principal and interest payment would be around $2,250 at current rates—nearly $1,000 more than it would have been at 3% rates. Such affordability barriers have sidelined many would-be purchasers, particularly millennials and Gen Z buyers who are already burdened by student debt and rising living costs. As a result, the share of first-time buyers in the market has dwindled to just 29% in June, below the historical average of 40%.

Inventory constraints exacerbate these issues. While the number of homes for sale rose 23.4% year-over-year to 1.32 million, this increase is from an extremely low base, and much of it consists of higher-end properties that don't address the needs of entry-level buyers. Builders have ramped up construction of new homes, but supply chain disruptions, labor shortages, and regulatory hurdles have kept new inventory from flooding the market. Moreover, many homeowners are "locked in" to their low-rate mortgages from previous years, reluctant to sell and face higher borrowing costs on a new purchase. This phenomenon, often called the "mortgage rate lock-in effect," has reduced the turnover of existing homes, further tightening supply.

Experts in the field offer varied perspectives on the market's trajectory. NAR Chief Economist Lawrence Yun noted that while the uptick in inventory is a positive development, it's insufficient to offset the drag from high rates. "We're seeing a market where demand is there, but affordability is the roadblock," Yun stated in the report. "If mortgage rates ease even modestly in the coming months, we could see a rebound in sales activity." Indeed, with the Federal Reserve signaling potential rate cuts later in 2025 amid cooling inflation, there is optimism that borrowing costs could dip below 6% by year's end, potentially revitalizing buyer interest.

However, not all forecasts are rosy. Some analysts warn that even with lower rates, prices may not moderate significantly due to ongoing supply shortages. Danielle Hale, Chief Economist at Realtor.com, pointed out that "the housing market is caught in a vicious cycle: high prices deter buyers, but low sales keep inventory tight, which in turn props up prices." She anticipates that sales could remain subdued through the summer, with a possible pickup in the fall if economic conditions improve. Additionally, external factors like election-year uncertainty and geopolitical tensions could influence consumer confidence and investment in real estate.

The broader economic implications of this housing slowdown are significant. Housing accounts for about 15-18% of U.S. GDP when including related industries like construction, real estate services, and home furnishings. Sluggish sales can ripple through the economy, affecting jobs in these sectors and potentially slowing overall growth. For instance, homebuilders like Lennar and D.R. Horton have reported mixed results, with some scaling back projects due to softer demand. On the consumer side, rising home equity—fueled by price appreciation—has provided a wealth buffer for current homeowners, but it widens the inequality gap, as renters and aspiring buyers are left behind.

Looking ahead, several trends could shape the market's recovery. An increase in new home construction, which saw sales rise 4.4% in June to an annual rate of 617,000 units, offers a glimmer of hope. New homes often come with incentives like rate buydowns, making them more attractive than resales. Furthermore, demographic shifts, such as baby boomers downsizing and millennials entering their peak homebuying years, could drive long-term demand. Policy interventions, including potential expansions of affordable housing programs or tax incentives for first-time buyers, might also play a role, though these face political hurdles in a divided Congress.

In summary, June's housing data reveals a market at a crossroads: sales are stumbling under the weight of high costs and rates, yet prices continue their ascent amid scarcity. For buyers, patience may be key as they await more favorable conditions, while sellers enjoy leverage but risk longer listing times. As the year progresses, all eyes will be on interest rate movements and inventory levels to determine if the U.S. housing market can shake off its current doldrums and return to more robust activity. Until then, the dream of homeownership remains elusive for many, even as the value of existing homes reaches new pinnacles. (Word count: 1,048)

Read the Full Forbes Article at:
[ https://www.forbes.com/sites/antoniopequenoiv/2025/07/23/us-home-sales-slid-27-in-june-as-prices-reach-all-time-high/ ]

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