The inventory of existing homes for sale rose while prices eased somewhat from their record-highs in July, suggesting some relief may be in store for prospective buyers gripped by months of surging prices.
Total housing inventory rose 7.3 percent over-the-month in July, according to the National Association of Realtors (NAR). At 1.32 million units, this is equivalent to around 2.6 months at the current monthly sales pace.
At the same time, the median price of an existing home retreated slightly to $359,900 in July from $363,300 in June. While the dip is encouraging to buyers facing sticker shock, the July price was up 17.8 percent from a year ago and marked the 113th straight month of year-over-year increases.
“We see inventory beginning to tick up, which will lessen the intensity of multiple offers,” Lawrence Yun, NAR’s chief economist, said in a statement.
“Although we shouldn’t expect to see home prices drop in the coming months, there is a chance that they will level off as inventory continues to gradually improve,” Yun added.
Strong demand in the booming housing market has pushed to prospective buyers to outbid one another, leading many homes to sell above listing price. The typical home remained on the market for 17 days in July, the same level as June but down from 22 days a year ago, according to NAR. In July, 89 percent of homes sold were on the market for less than a month.
Existing home sales rose by 2 percent month-over-month in July, the second consecutive month of increases, though the bulk of the growth was driven by higher-end property sales.
“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,” Yun said.
Sales of new single-family homes increased in July after three straight monthly declines, according to a Commerce Department report released Tuesday (pdf). The median price of a new home climbed to a record high of $390,500 in July.
Rising home prices have increasingly sidelined prospective buyers, with a recent National Association of Home Builders (NAHB) report showing that the main reason people actively looking to buy a home gave for not pulling the trigger on a purchase was the inability to find one within their price range. Two-thirds of active buyers in the second quarter of 2021 spent three months or more searching for a home but remained empty-handed.
First-time buyers accounted for 30 percent of sales in July, down by one percentage point from June and four percentage points from a year ago, according to NAR. The inability to find an affordable home to buy is also putting upward pressure on rent.
“Some prospective buyers who are priced out are raising the demand for rental homes and thereby pushing up the rental rates,” Yun said.