into June 2022

• Existing Home Sales fell by 5.4% to 5.12 million units (annualized) in June 2022 versus the month prior
  
  
• The inventory of unsold Existing Homes improved to 1.26 million units in June 2022, from 1.20 million in May
• Median Existing Home prices continued a strong pace of growth at 13.4% year-over-year
• Distressed home sales – including foreclosures and short sales – as a share of total are virtually unchanged over the year since June 2021

Total Existing Home Sales fell by 5.4% in June 2022 to 5.12 million units at an annualized pace, according to the National Association of Realtors (NAR). This translates to a year-over-year decline of 14.2% versus June 2021. Existing Home Sales have not been this low consistently since mid-2015, though the uncertainty caused by the pandemic briefly induced a drop a sales to below 5 million units (annualized) in April through June of 2020 (4.44 million, 4.07 million, 4.84 million). Rising mortgage rates, the impacts of inflation on consumer spending power, and devastated consumer confidence combine to suggest that the U.S. housing market will continue its current trend of retreat in the months to come.

Single-family Existing Home Sales declined by 4.8% for the month in June 2022 to an annualized pace of 4.57 million units. This is down from a pandemic-era high of 5.90 million units in January 2021, and a pace of 5.75 million units (annualized) to start 2022 in January. Single-family Existing Home Sales account for approximately 90% of Total Existing Home Sales. With mortgage rate increases like nothing seen in their collective experience, many first-time homebuyers may be getting cold feet – especially with heavy coverage of the potential for recession in the U.S. economy in the coming year. The June 2022 NAR data show that first-time homebuyers accounted for 30% of Existing Home Sales in June 2022, on par with June 2021’s results.

NAR data shows that the inventory of unsold Existing Homes is on the rise. This trend reflects the falling sales numbers, which have posted five (5) consecutive months of decline since the start of 2022. But the number of days homes are remaining on the market is still in decline. The June 2022 NAR release showed homes remained on the market for an average of 14 days – down from 16 days the prior month and 17 days in June 2021. This short turnaround time despite falling sales suggests that the housing market has found some sense of a localized equilibrium.

While prices have climbed at an extraordinary pace throughout the past few years, those still able to buy are either willing to endure the increased costs they face or have so much momentum behind their decision to buy that they are willing to swallow the bitter pill. With Existing Home Sales falling consistently and rapidly throughout the year thus far and likely into the foreseeable future, an assumption of rational behavior suggests that homebuyers are still finding value – the alternative would be to that those same buyers put off their purchase until the market’s current froth dissipates in response to falling demand.

Overall consumer price inflation will continue to eat away at household budgets through at least the end of 2022. And savings rates among income-earners in the U.S. have fallen sharply and are now at lows not seen since 2009, implying that potential home buyers’ down payment capacity is shrinking as we look to the next year or two for the housing market. While housing supply does not necessarily have a boost waiting in the wings to assist price trends, the housing market’s waning demand side support should help to bring home price growth down to a much more sustainable pace over the coming year. The health of the U.S. housing market after that will depend upon the depth of any potential recession – and the job losses that such a result would entail.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.