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Housing market showing signs of cracking | CNBC

In pricey Southern California, sales of both new and existing homes fell sharply in June compared with a year ago, according to CoreLogic. Demand is still quite strong, and while prices continue to gain, more listings are showing price reductions.

“The market is strong, but I’m seeing a noticeable difference in the number of buyers that are looking at my listings each week,” said David Fogg, a real estate agent based in Burbank, California. “We’re still selling most every home, but now it is usually with just one or two offers over the 10 to 15 offers we were seeing earlier in the year.”

‘Anything-goes list-price strategy’

Fogg said he is also working very closely with his sellers now to make better and more realistic decisions about pricing.

“The anything-goes list-price strategy is no longer working. Buyers want to buy, but we’re seeing fewer of them, and they are much more careful. Many properties are now not selling and/or coming down in price.”

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In a twist, a sales slowdown and more seller sanity could now actually boost the very slow recovery in homeownership. It ticked slightly higher again in the second quarter of this year, according to the U.S. Census.

“The rise in homeownership in the spring was consistent with the last few quarters, so while there appears to be a slowdown in the growth rate of home sales and prices, it has not slowed rising homeownership,” said Sam Khater, chief economist at Freddie Mac.

Homeownership is still well below the peak of the housing boom in 2005 and a full percentage point below the 50-year average. This is because the largest generation, millennials, was delayed financially.

“This lag reflects the long-lasting scars from the Great Recession and the lopsided nature of this recovery. Despite years of continuous job growth and a slowly improving economy, it was only last year where we started to see an uptick in homeownership,” added Khater.

Millennials finally began entering the housing market in huge numbers last year, only to find a critical shortage of homes for sale and fast-rising home prices. Bidding wars became the norm, and young potential buyers from coast to coast were often priced out.

“I thought I was at a higher price point where it would be a little bit easier for me to get a place without a lot of competition, but I’ve put down two offers so far and both times been beaten out by cash offers,” said Brittany Storoz, a millennial who was house hunting in Denver, in an interview last winter. One of the homes she toured saw more than 100 people walk through it in just three days.

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Housing market showing signs of cracking