NEWS

Point Trader Group reports that existing home sales in the United States dropped more than expected in June, reflecting deeper concerns about a prolonged housing market downturn. Persistently high mortgage rates and economic uncertainty are keeping potential buyers on the sidelines, weighing heavily on overall market activity.

According to the National Association of Realtors (NAR), existing home sales fell by 2.7% from May to a seasonally adjusted annual rate of 3.93 million units in June – a figure that underscores the ongoing softness in the housing sector.

Mortgage Rates Holding Back Demand – Point Trader Group Insight

"High mortgage rates are maintaining home sales at cyclical lows," said Lawrence Yun, NAR's chief economist. He added that a drop in the average mortgage rate to 6% could potentially bring 160,000 renters into the market as first-time buyers, along with more activity from existing homeowners.

Point Trader Group has previously highlighted how elevated borrowing costs are one of the key barriers preventing a full recovery in the US housing market.

Construction and Building Permits Also Falling

In another sign of weakening momentum, government data released last week showed that single-family home starts fell to their lowest level in 11 months, while building permits for future construction dropped to their weakest level in over two years.

According to Point Trader Group's housing outlook, such declines in supply indicators may trigger longer-term imbalances in housing availability and affordability, while also acting as a drag on broader GDP growth.

Trump Criticizes Fed Chair – Rates Seen as Too High

Former President Donald Trump renewed his criticism of Federal Reserve Chair Jerome Powell, saying:

“People can't buy homes because this man is a fool. He keeps rates too high—probably for political reasons.”

This political tension adds to the uncertainty surrounding monetary policy, something Point Trader Group says real estate investors should closely monitor.

Fed Expected to Hold Rates Steady – Point Trader Group Outlook

The Federal Reserve is expected to keep the federal funds rate in a range between 4.25% and 4.50% during next week’s policy meeting. Though the Fed cut interest rates three times in 2024, the last being in December, markets are now pricing in a pause, especially amid inflationary concerns.

Point Trader Group anticipates continued weakness in residential investment, including home sales and broker commissions, which will likely weigh negatively on the second quarter GDP figures.

Inventory Rises While Price Growth Slows

The housing market slowdown is especially pronounced in areas like Washington, D.C., where government budget cuts and federal layoffs have increased housing supply. As Point Trader Group notes, this has led to slower home price appreciation, diminishing household wealth and reducing consumer spending capacity.

Housing inventory rose by 15.9% year-over-year in June to 1.53 million units, while the median existing-home price climbed 2% to a record-high of $435,300.

Market Imbalance Worsens – Point Trader Group Warns

At the current sales pace, it would take 4.7 months to exhaust existing inventory, compared to 4.0 months a year ago. A balanced market typically requires 4 to 7 months of supply, indicating a potential shift toward a buyer’s market.

Homes stayed on the market for an average of 27 days, up from 22 days in June 2024. First-time buyers accounted for 30% of all sales, up from 29% last year but still far from the healthy 40% benchmark.

Cash Sales and Distressed Properties on the Rise

Cash purchases made up 29% of all transactions, up from 28% a year ago. Meanwhile, distressed sales – including foreclosures – rose to 3%, up from 2% last year.