Low Inventories Crimp June Existing Home Sales

It’s a familiar refrain: low housing inventories hampered existing home sales in June, the National Association of Realtors reported yesterday.

NAR said total existing home sales fell by 1.8 percent to a seasonally adjusted annual rate of 5.52 million in June from 5.62 million in May. Despite the decline, June’s sales pace is 0.7 percent above a year ago.

Single-family home sales fell by 2.0 percent to 4.88 million in June from 4.98 million in May, but were 0.6 percent higher than a year ago (4.85 million). The median existing single-family home price rose to $266,200 in June, up 6.6 percent from a year ago. Existing condominium and co-op sales were unchanged at 640,000 units in June and 1.6 percent higher than a year ago. The median existing condo price rose $245,900 in June, 6.5 percent higher than a year ago.

Sales fell everywhere except the Midwest, where they rose by 3.1 percent to 1.32 million in June, seasonally annually adjusted, with no change from a year ago. The median price in the Midwest rose to $213,000, up 7.7 percent from a year ago.

In the South, sales fell by 4.7 percent to an annual rate of 2.23 million (unchanged from a year ago). The median price in the South rose $231,300, up 6.2 percent from a year ago. Sales in the West declined by 0.8 percent to 1.21 million in June, but improved by 2.5 percent above a year ago. The median price in the West rose $378,100, up 7.4 percent from a year ago. In the Northeast, sales fell by 2.6 percent to 760,000 but improved by 1.3 percent from a year ago. The median price in the Northeast rose to $296,300, 4.1 percent higher than a year ago.

“Exceptionally lean inventories kept buyers on the sidelines,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “The housing market appears to be woefully out of balance. The entrance of investor buyers earlier in the recovery process has taken many lower-price homes off the market, particularly in the Sun Belt, where these investors concentrated their purchases.”

Vitner noted lot development costs and construction costs have also risen dramatically, “meaning that very little new supply has been added to the pipeline in recent years. There are simply too few homes available for entry level buyers to purchase, particularly in the South and West, which account for the bulk of the nation’s new household growth.”

NAR Chief Economist Lawrence Yun said the previous three-month lull in contract activity translated to a pullback in existing sales in June. “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,” he said. “The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”

The good news, Yun noted, is “sales are still running slightly above last year’s pace despite these persistent market challenges.”

NAR said the median existing home price for all housing types in June rose to $263,800, up 6.5 percent from a year ago ($247,600). Last month’s median sales price surpasses May as the new peak and is the 64th straight month of year-over-year gains.

Total housing inventory at the end of June declined by 0.5 percent to 1.96 million existing homes available for sale, 7.1 percent lower than a year ago (2.11 million) and the 25th consecutive monthly drop. Unsold inventory fell to a 4.3-month supply at the current sales pace, down from 4.6 months a year ago.

First-time buyers represented 32 percent of sales in June, down from 33 percent both in May and a year ago.

“It’s shaping up to be another year of below average sales to first-time buyers despite a healthy economy that continues to create jobs,” Yun said. “Worsening supply and affordability conditions in many markets have unfortunately put a temporary hold on many aspiring buyers’ dreams of owning a home this year.”

NAR said properties typically stayed on the market for 28 days in June, up from 27 days in May but down from 34 days a year ago. Short sales were on the market the longest at a median of 102 days in June, while foreclosures sold in 57 days and non-distressed homes took 27 days. Fifty-four percent of homes sold in June were on the market for less than a month.

The report said all-cash sales represented 18 percent of transactions in June, down from 22 percent both in May and a year ago, the lowest since June 2009 (13 percent). Individual investors purchased 13 percent of homes in June, down from 16 percent in May and unchanged from a year ago. Fifty-six percent of investors paid in cash in June.

Distressed sales represented 4 percent of sales in June, down from both May (5 percent) and a year ago (6 percent) and matching last September as the lowest share since NAR began tracking in October 2008. Three percent of June sales were foreclosures and 1 percent were short sales.