| Key Points: – June home sales dropped 2.7% from May as mortgage rates remained near 7%. – Inventory rose nearly 16% year-over-year, yet prices hit a record $435,300. – High-end homes are driving sales growth while first-time buyers remain sidelined |
The U.S. housing market continues to send mixed signals. According to the National Association of Realtors, existing home sales for June fell 2.7% month-over-month to an annualized rate of 3.93 million units, surprising analysts who expected a much smaller decline. But despite softening demand, prices are still climbing — reaching a record-high median of $435,300.
For middle-market investors, this data presents both a challenge and a strategic opportunity.
Mortgage rates are the elephant in the room. At 6.77%, the average 30-year fixed mortgage rate has hovered near cycle highs since spring, discouraging both first-time buyers and move-up homeowners from entering the market. The result? Stagnant sales volumes and longer time on market — now averaging 27 days versus 22 this time last year.
And yet, home prices continue to rise. June marked the 24th straight month of year-over-year price increases, driven by a long-standing shortage in housing supply and resilient demand at the high end of the market.
The supply situation has improved modestly, with 1.53 million homes on the market — up nearly 16% from a year ago — but remains well below the level needed for a balanced market. With a current supply of just 4.7 months, the market still leans in favor of sellers, particularly in premium segments.
Sales of homes over $1 million rose 14%, while those priced under $100,000 dropped 5%. Homes between $100,000 and $250,000 were up 5%, suggesting some traction in mid-tier affordability brackets, though far from historical norms. First-time buyers accounted for just 30% of sales, well below the typical 40% share, underscoring affordability pressures in a high-rate environment.
So, what does this mean for investors focused on small- and mid-cap real estate opportunities?
It may be time to double down on targeted real estate plays — not just in residential development, but also in rental housing, home improvement suppliers, and regional banks with exposure to housing markets. Companies servicing the higher end of the housing spectrum, or those innovating around affordability, are poised to benefit as buyers adjust expectations and capital flows to where inventory and demand align.
Furthermore, the rise in cash transactions (29% of sales) suggests that liquidity remains strong in certain market segments, and that investors are still finding value — despite rate headwinds.
In a market where fundamentals are diverging, middle market investors should be looking beyond national headlines and focusing on regional trends, builder sentiment, and small-cap housing companies with healthy balance sheets and smart positioning.
While rising prices may be discouraging to homebuyers, they’re a reminder that the housing shortage is far from solved — and the companies working to close that gap could deliver long-term upside.