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Real estate slowdown – um, I dunno

After surging in May, the pace of homes under contract fell 1.9 percent in June — both year-over-year and month-over-month — according to the National Association of Realtors’ monthly index.

Lawrence Yun, NAR’s chief economist, described recent ups and downs in the pending sales index as indicative of a “turning point for the market.”

“Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat,” he said in a statement. “The moderate slowdown in sales is largely due to the huge spike in home prices.”

Home prices broke records for the third consecutive month in May, according to the S&P CoreLogic Case-Shiller index.

By June, the median existing-home price was $363,300, up 23 percent over last year and marking the 112 consecutive months of year-over-year price gains, according to NAR.

NAR’s pending home sales index is generally seen as a forward-looking indicator of the pace of existing sales in one or two months’ time, as home sales often take several weeks to close. The dip in June comes after pending home sales jumped 8 percent month-over-month and 13.1 percent year-over-year in May.

\Yun said he expects sales activity in the Midwest to remain strong, as the region is the most affordable for buyers.

Pending home sales logged year-over-year gains in both the Midwest and Northeast in June, while contract activity in the South and West regions dropped.

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Real estate slowdown – um, I dunno

As home prices soared, existing-home sales dipped for the fourth month in a row, according to the National Association of Realtors’ report for May.

National Real Estate Sales Fall

Sales fell nearly 1 percent month-over-month to a seasonally adjusted annual rate of 5.80 million — approaching pre-pandemic levels. Sales were 44.6 percent higher than they were a year ago, about two months into the coronavirus scourge.

Lack of Real Estate Inventory

“Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market,” NAR’s chief economist Lawrence Yun said in a press release.

Only 1.23 million units were available at the end of May — a 7 percent increase from April but down 20.6 percent from a year ago, when 1.55 million homes were on the market.

Median Home Prices Rising

That drove up the median existing-home price for single-family homes, townhomes, condominiums, and co-ops to $350,300 in May, a record year-over-year increase of 23.6 percent.

First-time buyers accounted for just 31 percent of sales, down from 34 percent last year. Rising home prices and tighter lending contributed to the drop.

But those who can afford to buy homes are snatching them up faster than they were a year ago. Eighty-nine percent of all homes sold last month were taken off the market in less than a month, according to the report. Homes generally spent about 17 days on the market, down from 26 a year earlier.

Individual investors and second-home buyers purchased 17 percent of homes in May, a tick up from 16 percent last year. All-cash sales accounted for 23 percent of transactions, down by a quarter from the figure by a quarter but 17 percent more than the share of cash sales last year.

The median existing single-family home price was $356,600 in May, up 24.4 percent from last year. Single-family home sales fell to a rate of about 5.1 million, down 1 percent from April and up 39.2 percent from a year ago.

The median price for a condo was $306,000 in May, a year-over-year increase of 21.5 percent. Condo and co-op sales had a seasonally-adjusted annual rate of 720,000 units, the same as in April but a 100 percent increase from last year.

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So, readers ask, what do I think of the slower Boston real estate market?

Sales of single-family homes dropped a whopping 25 percent in July in Massachusetts, and condo sales also fell precipitously by 21 percent compared to the same month last year, the Massachusetts Association of Realtors reported.

Prices also declined for both categories — 3.5 percent for single-family homes and 4.1 percent for condos. – Source: The Boston Business Journal

I don’t know if I have anything to add to the conversation. On one side, I think you have more people putting their homes on the market than previously, a phenomenon I can’t explain. It seems counterintuitive to be doing so. I guess people fear they won’t be able to sell, down the line, because of higher inventory levels, so they put their homes on the market, now, which, of course, makes it a self-fulfilling prophecy.

Why aren’t people buying?

I dunno. First, it’s not that no one’s buying. It’s that fewer people are buying. I bought a condo in May, for example. I needed/wanted to move, so I did. The difference between what something is selling for, today, and what something MIGHT sell for, tomorrow, wasn’t a big concern to me. People who want to or must buy, are buying.

The experts list a bunch of reasons that people aren’t buying. I agree with all of them. Or, none of them. High prices? Sure. High-interest rates? Sure. Are speculative buyers getting out of the market? Okay. Tough economy? If you say so. Fear of war and worldwide conflagration? Undoubtedly.

The percentage of people who own versus rent, in the United States, actually increased, over the past several years. There’s always going to be a limit on the number of owners, though, don’t you think, no matter what homes cost. Some people will always rent.

Maybe we just hit that limit. Now, we’re just seeing the typical, normal number of owners turning over their homes.

I have had more buyers contact me over the past two weeks than in the past two months. Could be luck or good fortune (karma?). Could be a sign that things have stabilized.

If I was a first-time homebuyer, and lived in Boston, or was moving to Boston, I’d buy, versus rent, because that’s the kind of person I am.

If I was a parent with a child coming to school in Boston, I’d definitely buy, because rents are still really high, in Boston, and going higher.

If I was a rich suburbanite, looking to move into the city, I’d still buy. I’d price my home in the suburbs below the competition because I bought my home back in 1970, and I’m sitting on three-quarters of a million dollars in gains.

If I lived in a two-bedroom condo in the South End, I guess I’d put off selling, if it was simply so I could buy another two-bedroom condo, down the street.

That’s about where I stand on this, I guess.

Contact me to find or set up an appointment to start your Boston condo-buying process.

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