July Existing Home Sales Ride the Wave

Existing home sales surged by a record 24.7 percent in July, the second straight double-digit monthly gain, the National Association of Realtors reported yesterday.

The report said total existing home sales jumped to a seasonally adjusted annual rate of 5.86 million in July. The 24.7% growth broke the previous record monthly increase in sales, which just occurred in June (20.7%). Sales as a whole rose year-over-year by 8.7% from 5.39 million in July 2019.

NAR said single-family home sales jumped to a seasonally adjusted annual rate of 5.28 million in July, up 23.9% from 4.26 million in June and up by 9.8% from one year ago. The median existing single-family home price rose to $307,800 in July, up 8.5% from July 2019. Existing condominium and co-op sales increased to a seasonally adjusted annual rate of 580,000 units in July, up 31.8% from June and equal to a year ago. The median existing condo price rose to $270,100 in July, an increase of 6.4% from a year ago.

All four major regions saw double-digit, month-over-month increases, while the Northeast was the only region to show a year-over-year decline. In the South, sales jumped by 19.4% to an annual rate of 2.59 million in July and improved by 12.6% from a year ago. The median price in the South rose to $268,500, a 9.9% increase from a year ago. Sales in the West rose by 30.5% to an annual rate of 1.24 million in July and improved by 7.8% increase from a year ago. The median price in the West rose to $453,800, up 11.3% from July 2019.

Sales in the Midwest rose by 27.5% to an annual rate 1.39 million in July and improved by 10.3% from a year ago. The median price in the Midwest rose to $244,500, an 8.0% increase from a year ago. Sales in the Northeast jumped by 30.6% to an annual rate of 640,000, but declined by 5.9% from a year ago. The median price in the Northeast rose to $317,800, up 4.0% from a year ago.

“MBA’s purchase applications data and the 25% jump in existing home sales in July underscore the significant strength in housing demand this summer,” said Mike Fratantoni, Chief Economist with the Mortgage Bankers Association. “However, the critical lack of housing inventory is fueling faster home-price growth. With only 3.1 months of existing supply on the market, even with the recent pickup in the pace of homebuilding, the lack of inventory is going to continue to be a hurdle by limiting some prospective buyers’ choices and weakening their purchasing power.”

Fratantoni said should supply meaningfully pick up in the months ahead, the demand will be there for more sales. “MBA is still forecasting for purchase originations to climb 5 percent this year to $1.34 trillion – a high not seen since 2006 ($1.40 trillion).”

Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said existing home sales “finally caught up” to the rest of the housing industry.

“July’s surge in existing home sales reflects some catch-up for sales lost during the spring selling season, when the economy was largely shut down, as well as a shift in preferences away from long-term renting toward homeownership,” Vitner said. “Sales are not likely to rise another 25% next month but will remain strong as long as employment conditions for middle- and upper-income households continue to improve.”

“The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days,” said NAR Chief Economist Lawrence Yun. “With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”

NAR reported the median existing home price for all housing types in July rose to $304,100, up 8.5% from a year ago ($280,400), as prices rose in every region. July’s national price increase marks 101 straight months of year-over-year gains. For the first time ever, national median home prices breached the $300,000 level.

Total housing inventory at the end of July fell to 1.50 million units, down from both 2.6% in June and 21.1% from one year ago (1.90 million). Unsold inventory sits at a 3.1-month supply at the current sales pace, down from 3.9 months in June and down from the 4.2-month figure recorded a year ago. “The number of new listings is increasing, but they are quickly taken out of the market from heavy buyer competition,” Yun said. “More homes need to be built.”

The report said properties typically remained on the market for 22 days in July, seasonally down from 24 days in June and from 29 days a year ago. Sixty-eight percent of homes sold in July were on the market for less than a month.

First-time buyers represented 34% of sales in July, down from 35% in June and up from 32% a year ago. Individual investors or second-home buyers purchased 15% of homes in July, up from both 9% in June and from 11% a year ago. All-cash sales accounted for 16% of transactions in July, equal to June but down from 19% a year ago.

Distressed sales represented less than 1% of sales in July, down from 3% in June up from 2% a year ago.