Existing Home Sales fell 5.4% from May to June but let's think about this in the context of the market. June’s report likely reflects people shopping for homes in April and May, which included much of the rise in rates we’ve seen this year. While it’s true that buyer activity is slowing, there are a few pieces of the puzzle that suggest demand will remain strong and continue to be supportive of home prices.
Homes remained on the market for just 14 days on average in June, the fewest days on the market since tracking this metric began in 2011. Plus, 88% of homes that sold in June were on the market for less than one month. Homes priced right are selling quickly. The FHFA (Federal Housing Finance Agency) released their House Price Index, which measures home price appreciation on single-family homes with conventional loans. Prices rose 1.4% in May and are up 18.3% year-over-year, which is a slight decline from 18.7% in the previous report, but still very hot.
In regard to inventory, there were 1.26 million homes available for sale at the end of June, which is nearly 10% higher than May’s inventory level. This equates to a 3 month supply of homes, up from 2.6 months in May. However, six months is considered a balanced market, so this data speaks to the ongoing imbalance of supply and demand, which also should continue to be supportive of home prices. The media may report an increase in inventory but we all know that each year, many parents list their homes for sale by late spring or early summer so their kids are settled before the new school year begins in the fall, causing a normal inventory build over the summer months.
In addition, CoreLogic’s Single-family Rent Report showed that annual single-family rent growth remained at a record high in May, with rents up 13.9% when compared to May 2021. This report includes both new and renewal rents, which are rising around 8%. These increases in rental prices should continue to push people to see the opportunity in housing, which again will help homes continue to appreciate.
Lastly, Zillow released their July Home Values Index, showing that they think home values will increase 7.8% over the next 12 months. While this was a revision lower due to slower monthly appreciation numbers and a slower pace of sales, this level of appreciation is still extremely strong for wealth creation. Zillow believes we will see home price appreciation moderate to pre-pandemic levels, but a slower pace of appreciation is very different from a crash.
Looking ahead, the biggest market news of the week will be announced this afternoon with the Fed's Monetary Policy Statement and press conference. So long as the Fed does what they're expected to do in hiking the Fed Funds Rate by 75 basis points and doesn't scare the markets, we should see a favorable effect on interest rates.
Now, buyers who put 25% down may be eligible for streamlined approval, eliminating the need for a full condo review. And that’s not all. They can also look forward to: