Renters Opting Not to Buy as Home Ownership Challenges Persist

June brought little relief to the challenging housing market as existing home sales have reached a six-month low, according to Marcus & Millichap’s July housing report. Softer purchase activity should create leverage for buyers in the current climate, but a lack of entry-level homes on the market is hindering sales.

After reaching an all-time high in May, the median home price eased by only 0.2 percent, and the 30-year-fixed-rate mortgage held near 7 percent. The number of existing houses for sale fell for a third straight month, according to the report, remaining about 50 percent under the June average for the prior two decades.

Meanwhile, many high-earning households are choosing to remain in the renter pool as the median monthly mortgage payment grew by almost $70 during the second quarter, extending the gap between renting and buying to roughly $1,290 per month, which is just 3 percent off the record high set in the fourth quarter of 2023.

The average monthly income of an apartment tenant rose nearly 4% annually to reach an all-time high in the second quarter. This trend has expanded the renter pool and pushed occupied stock to new highs – growing to more than 160,000 rentals nationwide, the strongest quarterly net absorption volume in nearly three years. First-half absorption volume surpassed the full 2023 year by almost 35,000 units, according to the report.

Class A and Class B properties, which have renter pools more aligned with the challenging transition to homeownership, gained the most during the second quarter. While high-earning tenants are opting to stay in their rentals longer, easing inflation relative to wage growth has allowed some Class C renters to move up the quality stack, the report said.

Newly built homes for sale reached a new high as purchases fell by more than 7% year-over-year. This trend is driven in part by newly built houses being listed before construction is complete. In June, finalized homes accounted for just over 21 percent of the newly built houses available for purchase, compared to a long-term average of about 26 percent. In addition, the median sale price climbed by more than three percent month-over-month in June, according to the report.

Single-family housing permits fell to a 13-month low in June, aligning with the homebuilder confidence index weakening to the softest measure since December of last year. Multifamily permits increased for the first time in four months in June on strong apartment absorption, however permits remain down 6 percent year over year.