As Home Prices Break Record, Sales Begin to Slow

July 30, 2021

The red hot housing market may be starting to cool down as buyers find themselves priced out of a competitive market.

Annual price gains hit a new high in May. Nationally, home prices were 16.6% higher than in May 2020, according to the S&P CoreLogic Case-Shiller Home Price Index. That is the highest annual gain since the index began in 1987. The previous record was set in the previous month.

After surging prices in May, potential homebuyers may have found themselves on the sidelines in June. Sales of newly built single-family homes for the month were at a seasonally adjusted annual rate of 676,000 units. That is down 6.6% from May’s 724,000 and down 19.4% from the 839,000 sold in June 2020. Pending sales of existing homes fell 1.9% from the month before.

Much of the price gains have been driven by historically low inventory, but that may be starting to change. The number of newly listed homes in June rose 5% as compared to a year prior. Another key issue is mortgage rates, which climbed slightly at the beginning of June, adding to the market’s affordability issues. Rates came down later in the month, but are expected to climb more steadily later in the year, potentially slowing sales.

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