The real estate market in the U.S. tends to be more active in the spring and summer. Many homebuyers are looking to settle in before the start of the new school year and take advantage of the number of new listings.
However, it is worth noting that secondary home sales were down 3.3% in June compared to the last month. According to the National Association of Realtors, the seasonally adjusted annualized sales were 4.16 million units.
There was a significant drop from June 2022 with sales declining 18.9%, which was the slowest sales rate since June in 2009.
However, the current issue was not a lack of homebuyers, but rather the opposite. The ongoing shortage of available housing contributed to the continued weakness in the real estate market. At the end of June, there were only 1.08 million homes for sale, which was down 13.6% from last June. At the current rate of sales, it equates to the supply of 3.1 months, which is well below a six-month supply (which is often considered the balance between buyers and sellers).
Lawrence Yun, the chief economist for Realtors, said
"there aren't enough homes for sale actually, so the market could easily absorb double the inventories."
This year, the two largest homebuilder ETFs , the $iShares U.S. Home Construction ETF(ITB)$ and $SPDR S&P Homebuilders ETF(XHB)$ , have returned 43.2% and 37.2% year to date, easily beating the broader market with $iShares S&P 500 ETF(IVV)$ up 18.8%. Even the $Technology Select Sector SPDR Fund(XLK)$ , driven by the boom in tech stocks, was up 41.6% year-to-date and underperformed ITB.
Ticker | Assets under Management (USD) | Brief Description
| |
iShares US Home Construction ETF | 2.5billion | ITB tracks the Dow Jones U.S. Home Construction Index
| |
SPDR S&P Homebuilders ETF | 1.5 billion | XHB Tracks the S&P Homebuilding Sector Index | |
iShares Core S&P 500 ETF | 352.6 billion | IVV and S&P 500 shares the similar trend, with volatility approximately equal to the S&P 500’s. | |
Technology Select Sector SPDR Fund | 51.5 billion | XLK Tracks the S&P Information Technology Sector Index |
Source: TigerTrade
Mortgage Rates Could Affect the Real Estate Market
This trend will lead to multiple consequences. One result is that home prices remain high. For instance, the median price of an existing home sold in June was $410,200, which was the second-highest price recorded by realtors and only lowered to the price in June 2022.
Lawrence Yun said,
"Although home sales are declining, prices are on the high position stably in most parts of the country. Limited supply continues contributing to multiple offers, with one-third of homes selling surpassing list price in the last month."
Nonetheless, the price-friendly market is more active because of the spike in mortgage rates. While home prices remain firm, mortgage rates continue to put pressure on affordability of homebuyer. The rates remain in the 6-7% , which is significantly higher than the levels potential homebuyers faced just a few years ago.
First-time buyers are experiencing their toughest battle for home-searching yet, with the percentage of purchases dropping to 26% in June from 30% in June 2022, which is a new low since real estate brokers began tracking this metric.
Meanwhile, wealthy cash buyers appeared to be successfully driving the high-end market. According to the data, high-end home witnessed the smallest drop in sales, which was a significant change from the previous year's numbers. All-cash sales accounted for 26 % of transactions in June, which was a higher increase than in May and June of last year.
Donald, chairman of the board of DH Horton (the largest homebuilder in the U.S.), said,
"Despite continuously increasing mortgage rates and inflationary pressures, our net sales orders were up 37% from a year ago thanks to the affordable price, limited supply of existing homes and the favorable demographics supporting demand. "
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