Sinking sales, rapidly rising inventory and prices at all-time highs gives us a picture of the current state of the housing market. According to the National Association of Realtors (NAR) home sales data, sales of existing homes in June fell 5.4% year over year. That’s the highest rate of decline so far this year. 

 A shortage of homes for sale has made circumstances difficult for buyers for quite some time. But inventory appears to be slightly improving.  In June, the months’ supply of homes for sale reached its highest level in more than four years. Per the NAR report, in June there was a 4.1 month supply of homes on the market nationwide, up from 3.1 months the previous year. What this means is that at the current pace, it would take a little more than 4 months to sell all the properties currently for sale. The market hasn’t seen an inventory above 4 months since 2020. Typically, in a balanced market, the supply of homes for sale would last six months. Supply less than six months is considered a seller’s market, and more than a six month supply is considered a buyers market. 

The median sales price also hit a new all-time high ($426,900) for the second month in a row. This in combination with still high interest rates, makes home ownership unattainable for many Americans. According to Zillow, interest on a 30- year mortgage averaged 6.6% annual percentage rate for the week ending August 1, 2024, down from 6.9% the previous year. While the interest rate on mortgages seem to be inching in the right direction, there needs to be more drastic changes in order for the housing market to become affordable. Ordinarily, high sale prices would be an incentive for home builders to construct more houses, thereby increasing their profits. However, inflation has driven up the  costs for building a home to record highs, drastically cutting into the home builders' profit margins. This equates to fewer new homes being added to the market. Simultaneously, many existing homeowners have a huge incentive not to sell. They can’t afford to lose their ultralow interest rate. In 2020 and 2021, millions of people got mortgage loans or refinanced their current loans at around 2%-3%. Selling their homes today would be they would have to exchange that very low interest rate for today’s much higher rate. 

Last, but not least,  economists and financial analysts have been anticipating the Federal Reserve (FED) cutting the Federal Funds Rate, which influences interest rates for mortgage loans. The FED increased the Federal Funds Rate eleven times in 2022- 2023, supposedly to battle inflation. While the FED has kept the Federal Funds rate steady since September 2023, it has yet to make any cuts. Until cuts happen to the Federal Funds Rate, interest rates on mortgages will still make buying a home beyond the budget of many Americans. So for all intents and purposes, a lot more needs to change before we see the housing market shift to a “buyers” market. 

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