The housing market has been steadily improving. Home prices are currently higher than they were prerecession. Housing demand is up, due in part to near-record-low mortgage rates. And existing-home sales are continuing to increase. But a severe lack of inventory is putting a strain on the market. For the past 25 months, housing inventory has fallen year over year. June was no exception; at the end of the month housing inventory fell to 1.96 million existing homes for sale, down 0.5 percent from a month earlier and 7.1 percent from a year earlier. At the current sales pace, there is a 4.3-month supply of homes on the market; a year ago, total unsold inventory was at a 4.6-month supply. After years of the housing market favoring buyers, conditions have shifted to create a seller's market.

No Relief from New Construction
An increase in residential construction could do much to alleviate the shortage. But housing starts have fallen 14 percent since the end of 2016. Builders are experiencing shortages of their own, in skilled labor and affordable land. Onerous land-use regulations are also preventing builders from developing land and building homes. According to Freddie Mac, housing starts are expected to remain low throughout 2017, closing out the year around 1.27 million. However, housing demand is expected to remain strong, due in part to low mortgage rates that should hover around 4 percent throughout 2017. The high demand and low supply will help fuel a rise in home prices, with house-price growth expected to climb above 6 percent by the end of the year.

A Good Time to Sell
In June, existing-home sales climbed higher year over year. However, the severe housing shortage caused a slight slump in month-over-month sales. According to Lawrence Yun, chief economist for the National Association of Realtors, "Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that's straining their budget." Affordable homes in particular are in high demand but low in supply. With housing starts expected to remain low, the only relief from the housing shortage may come from sellers looking to put their home on the market while conditions are so favorable for selling.

Regional Home Sales

Northeast - Existing-home sales annual rate of 760,000; a decrease of 2.6 percent from May but an increase of 1.3 percent from June 2016.

Midwest - Existing-home sales annual rate of 1.32 million; this is the only region that reported a month-over-month increase of 3.1 percent. Sales are unchanged from June 2016. 

South - Existing-home sales annual rate of 2.23 million; a decrease of 4.7 percent from May and unchanged from June 2016. 

West - Existing-home sales annual rate of 1.21 million; a slight decrease of 0.8 percent from May but an increase of 2.5 percent from June 2016.