July 20, 2023 | Housing Market Faces Reckoning: Price of Used Houses now the Same as Price of New Houses

Sales of previously owned single-family houses fell by 3.4% in June from May, to a seasonally adjusted annual rate of sales of 3.72 million houses, the lowest since January, according to the National Association of Realtors today. This is deep-dismal sales territory, even as supply rose to 3.1 months, and inventories to 960,000 houses, both the highest since November.

Compared to June 2022, sales of let’s just call them “used” houses were down by 18.9%. Compared to June 2021, sales were down by 29.0% (historic data via YCharts):

A bizarre twist in the market.

The median price of used houses has dropped from a year ago, but just a hair. The median price of new houses has dropped more sharply, as homebuilders got the memo, and now the median price of used houses is the same as the median price of new houses. This is a historic pricing disconnect that will correct.

The median price of new single-family houses, at $416,000 in May (last data available), was down by 16% from the peak in October, and by 7.6% year-over-year.

Potential home sellers are going to figure this out eventually. But they haven’t yet. And so you get this crazy-looking chart (historic data via YCharts):

This is a reality check. Homebuilders are the pros; they have figured out what it takes in this market amid the 7% mortgage rates. They cut prices and they’re building at lower price points, and they’re buying down mortgage rates and throwing incentives at buyers to make deals. And they can because some of their costs have gone down. And they’re selling homes to buyers that would have bought a used home.

Year-over-year, the median price of existing single-family houses fell by 1.2%, the fifth month in a row of year-over-year declines (historic data via YCharts):

Median days on the market lengthened year-over-year, by both measures:

• Homes, whether they sold or not, spent 44 days on the market before they either sold or were pulled off the market, up from 34 days a year ago, according to realtor.com.
• Homes that sold spent 18 days on the market in June before they sold, up from 14 days in June last year, according to the NAR. This excludes homes that failed to sell.

Inventory for sale rose to 960,000 houses in June, the highest since November.

Months’ supply rose to 3.1 months, the highest since November. The range in 2017 through 2019 was between 3.0 and 4.3 months (historic data via YCharts).

Wolf Richter July 20th, 2023

Posted In: Wolf Street

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