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The Housing Boom Is Officially Over – Home Sales Drop To New Low

by Sea Point Realtors

Shironosov / Getty Images / iStockphoto

The real estate boom that led to an unprecedented spike in home prices during the pandemic appears to have finally subsided. New home sales fell 6.6% below the revised Mairate in June. That's a drop to an annualized rate of 676,000 below the May rate of 724,000 and a whopping 19.4% below the June 2020 estimate of 839,000, according to the US Census Bureau.

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The average home price for a new home increased by around 6% compared to the previous month's growth of 15-20%. This decline could mean that the year-round inflated home prices are finally correcting themselves.

Peter Boockvar, chief investment officer of Bleakley Advisory Group, told CNBC that "the moderation in home sales is likely a combination of a sticker shock and the slowdown in home builders' ability to complete homes due to a variety of delays."

Whether the market is saturated with buyers or not remains to be seen in the next few months when prices bottom out or rise again. The sticker shock's Boockvar references could be representative of demand that will continue but remain reserved until prices fall again. The difference has a significant impact on the real estate market. Should the buyer's market be saturated, meaning everyone who needed a home bought one, prices could drop even further.

If demand is deliberately withheld due to exhausted buyers who threw their hands in front of historically inflated prices, the property market could simply be in a doldrums ready to rise again once prices hit interesting levels for lingering demand to have.

Sherwood Lumber's Michael Goodman previously told GOBankingRates that they expect high demand for at least the next year and a half or so as they have many timber companies on their books with projects not yet completed.

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Another possible factor that has caused a decline in home sales could be the rise in mortgage rates for buyers in June. Mortgage rates rose about a quarter of a percentage point in June, which may have been the tipping point for buyers fed up with sky-high stickers.

The USCB also adds that the inventory of new homes for sale has increased from a 5.5-month listing in May to a 6.3-month listing in June. This could potentially mean that the tide could turn and turn into a buyer's market if supply and prices stay at current rates and buyers persist.

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