More Home Inventory Enters the Market

More inventory is coming online in the resale home market, which could signify the frenzy is peaking.

From May to June, the inventory of unsold homes increased 3.3% to 1.25 million– equivalent to 2.6 months of the monthly sales pace, according to the National Association of Realtors.

The inventory total was still down 18.8% from one year ago (1.54 million). Unsold inventory is up from May’s 2.5-month supply but down from 3.9 months in June 2020.

“Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales,” said Lawrence Yun, NAR’s chief economist in a prepared statement.

After four months of declines, existing-home sales rose 1.4% on a seasonally adjusted annual rate from May to June, according to NAR. Sales hit a seasonally adjusted annual rate of 5.86 million in June and rose 22.9% from a year ago (4.77 million in June 2020).

The median existing-home sales price hit the second-highest level since 1999, rising at a year-over-year pace of 23.4%. There have now been 112 straight months of year-over-year gains.

“At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year,” Yun said.

Of the four major US regions, three registered small month-over-month gains. The fourth remained flat. However, all four areas recorded double-digit year-over-year increases.

In June, properties were typically on the market for 17 days. That was unchanged from May and down from 24 days in June 2020. Almost 90% of homes sold in June 2021 were on the market for less than a month.

First-time buyers represented less of the market in June (31% of sales) than in June 2020 (35% of sales). Investors or second home buyers purchased 14% of homes, down from 17% in May and 9% in June 2020. All-cash sales stayed at May’s level—23%. In June 2020, they were at 16%.

Stricter lending standards is another indicator that the market may start to cool. The Mortgage Bankers Association reports that residential mortgage lending standards are tightening as housing prices reach all-time highs.

“Mortgage credit availability in June fell to its lowest level since September 2020, ending more than half a year of increasing credit supply. The overall credit availability index remains close to 2014 lows, as mortgage credit has not recovered since the sharp downturn in the first half of 2020,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

He pointed out the tightening of mortgage credit availability was happening as a result of GSE policy changes which reduced the availability of high LTV refinance loans, impacting both conforming loans and GSE-eligible high balance loans.