Using home sales and prices as indicators of the strength of the economy and inflation, both measures are rising in Delaware.
Home sales in the First State climbed more than 5% in June compared with May, while the median sales price increased more than 2%.
“These figures tell me that the real estate market in Delaware is still thriving,” said Chrissy Steele, president of the Delaware Association of Realtors. “Despite higher interest rates, consumers feel confident buying and investing in Delaware.”
Sales in June totaled 1,302, up 5.17% from 1,238 in May.
However, compared with June 2022, sales dipped 12.38% from 1,486.
Steele said 2021 and most of 2022 were “abnormal” years for Delaware real estate.
“They were the best we’ve seen in almost two decades,” she said. “I attribute the sales activity during the pandemic to pent-up demand from buyers.”
Delaware has fared better than the national figures.
In the U.S., home sales slipped 3.3% in June to a seasonally adjusted annual rate of 4.16 million compared with 4.30 million in May, according to the National Association of Realtors. Year over year, sales fell 18.9%, down from 5.13 million in June 2022.
“Fewer Americans were on the move despite the usual life-changing circumstances,” said National Association of Realtors Chief Economist Lawrence Yun.
However, he predicted a rise in sales with two caveats: “The pent-up demand will surely be realized soon, especially if mortgage rates and inventory move favorably.”
The effect of higher interest rates
After the pandemic, the Federal Reserve increased interest rates to slow inflation and cool the market.
“It worked,” Steele said. “As rates increased, buyer demand subsided slightly.”
Sales are usually closed with mortgage rates that have been locked in one to two months earlier. The average rate on a 30-year, fixed-rate mortgage in April ranged from 6.14% to 6.75% according to Mortgage News Daily. In May, the rate range was 6.45% to 6.75% most of the month before surging to 7.14% on May 26. One year earlier on May 26, 2022, the average rate was 5.25%.
The Federal Reserve has increased rates 11 times since March 2022.
The latest quarter-point hike on July 26 brought the fed funds rate to a range of 5.25% to 5.5%. That’s what banks charge each other for overnight lending, and it affects rates on mortgages, credit cards, car loans, personal loans and other consumer debt.
Median sales price comparison mostly higher
In Delaware, the median home sales price climbed 2.71% to $372,833 compared with $363,000 in May and was also 1.88% higher than the June 2022 figure of $365,958.
Nationally, the median home price in June was $410,200, up 3.56% from $396,100 in May, but down 0.88% from $413,800 in June 2022.
“Limited supply is still leading to multiple-offer situations, with one-third of homes getting sold above the list price in the latest month,” Yun said.
Inventory of homes for sale higher in Delaware, lower nationwide
In the U.S., the inventory of homes for sale at the end of June was 1.08 million units, identical to May but down 13.6% from 1.25 million one year ago.
“There are simply not enough homes for sale,” Yun said. “The market can easily absorb a doubling of inventory.”
In Delaware, inventory of homes for sale rose in June by 2.69% to 2,711 compared with 2,640 in May. It was also 3.39% higher compared with the June 2022 inventory of 2,622.
But Steele said there are still not enough homes on the market to meet the demand of buyers.
“Low inventory, especially when paired with increasing sales prices, ensures a sellers’ market,” she said.
Reporter Ben Mace covers real estate and development news. Reach him at rmace@gannett.com.
