Existing Home Sales Up 4th Straight Month

Existing home sales maintained their strongest growth in years, increasing for the fourth consecutive month, the National Association of Realtors reported yesterday.

NAR said total existing home sales rose by 1.1 percent to a seasonally adjusted annual rate of 5.57 million in June from a downwardly revised 5.51 million in May. From a year ago, sales rose by 3.0 percent (5.41 million) and remain at their highest annual pace since February 2007 (5.79 million).

The report said single-family home sales increased by 0.8 percent to 4.92 million in June from 4.88 million in May, and are now 3.1 percent higher than the 4.77 million pace a year ago. The median existing single-family home price was $249,800 in June, up 5.0 percent from a year ago. Existing condominium and co-op sales rose by 3.2 percent to 650,000 units in June from 630,000 in May, and are now 1.6 percent higher than a year ago (640,000 units). The median existing condo price rose to $231,600 in June, 3.2 percent higher than year ago.

Regional, only the Northeast saw a decline, falling by 1.3 percent to 760,000, but was 5.6 percent higher than a year ago. The median price in the Northeast rose to $284,800, 1.4 percent higher than a year ago.

In the Midwest, sales jumped by 3.8 percent to 1.35 million in June and by 4.7 percent from a year ago. The median price in the Midwest rose to $199,900, up 5.7 percent from a year ago. Sales in the South in June remained unchanged from May at 2.26 million, and are 3.2 percent higher than a year ago. The median price in the South rose to $217,400, up 5.5 percent from a year ago. Sales in the West rose by 1.7 percent to an annual rate of 1.20 million in June, but are still 0.8 percent below a year ago. The median price in the West was $350,800, which is 7.2 percent above June 2015.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said 2016 can now be noted as the “breakout year” for the housing market–with a caveat.

“In the short-run, home purchases may get a boost from still-low mortgage rates,” Vitner said. “Following the United Kingdom’s unexpected vote to leave the European Union, the U.S. 10-year Treasury yield fell sharply, pulling the 30-year fixed mortgage rate below 3.5 percent. Along with favorable residential lending standards, the drop in mortgage rates could help explain the increase in the share of first-time home buyers, which rose to a four-year high.”

Vitner added although the report was generally favorable, some “payback” could be on the horizon. He noted that pending home sales have been trending lower in recent months and lack of inventory continues to be an obstacle. “Low level of inventories will continue to hold back an even more robust recovery in overall sales and support prices,” he said.

NAR Chief Economist Lawrence Yun said the “impressive” four-month streak of sales gains through June caps off a solid first half of 2016 for the housing market. “More traditional buyers and fewer investors were able to close on a home despite many competitive areas with unrelenting supply and demand imbalances,” he said. “Sustained job growth as well as this year’s descent in mortgage rates is undoubtedly driving the appetite for home purchases.”

But Yun also offered a note of caution. “Looking ahead, it’s unclear if this current sales pace can further accelerate as record high stock prices, near-record low mortgage rates and solid job gains face off against a dearth of homes available for sale and lofty home prices that keep advancing.”

NAR reported the median existing-home price for all housing types in June rose to $247,700, up 4.8 percent from a year ago ($236,300). June’s price increase marks the 52nd consecutive month of year-over-year gains and surpasses May’s peak median sales price of $238,900.

Total housing inventory at the end of June dipped by 0.9 percent to 2.12 million homes available for sale, 5.8 percent lower than a year ago (2.25 million). Unsold inventory is at a 4.6-month supply at the current sales pace, down from 4.7 months in May.

The report said the share of first-time buyers jumped to 33 percent in June, up from 30 percent in May and a year ago and the highest rate since July 2012 (34 percent). Through the first six months of the year, first-time buyers represented an average of 31 percent of buyers; they were 30 percent in all of 2015.

“The modest bump in June sales to first-time buyers can be attributed to mortgage rates near all-time lows and perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way onto the market,” Yun said. “The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply, particularly areas in the Midwest and parts of the South.”

NAR said all-cash sales held at 22 percent of transactions in June, unchanged from both May and a year ago. Individual investors purchased 11 percent of homes in June (lowest since July 2009 at 9 percent), down from 13 percent in May and 12 percent a year ago. Sixty-four percent of investors paid cash in June.

The report said properties typically stayed on the market for 34 days in June, an increase from 32 days in May but unchanged from a year ago. Short sales were on the market the longest at a median of 156 days in June, while foreclosures sold in 49 days and non-distressed homes took 30 days. Forty-eight percent of homes sold in June were on the market for less than a month.

Distressed homes represented 6 percent of sales in June, unchanged from May and down from 8 percent a year ago. Four percent of June sales were foreclosures (lowest since NAR began tracking in October 2008) and 2 percent were short sales. Foreclosures sold for an average discount of 11 percent below market value in June (12 percent in May), while short sales were discounted 18 percent (11 percent in May).