NAR: Total Existing Home Sales Up 2 Percent Despite Stubbornly Low Inventory
July’s existing-home sales steadily increased for the third consecutive month, even with stubbornly low inventory levels and rising prices.
WASHINGTON – Aug. 22, 2015 – July's existing-home sales steadily increased for the third consecutive month, even with stubbornly low inventory levels and rising prices. However, the market challenges likely led to a drop in first-time buyers to their lowest share since January, according to the National Association of Realtors® (NAR).
Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – increased 2.0 percent to a seasonally adjusted annual rate of 5.59 million in July from a downwardly revised 5.48 million in June. Sales in July remained at the highest pace since February 2007 (5.79 million), have increased year-over-year for ten consecutive months and are 10.3 percent higher year-to-year.
"The creation of jobs added at a steady clip, and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now," says Lawrence Yun, NAR chief economist. "As a result, current homeowners are using their increasing housing equity towards the downpayment on their next purchase."
The median existing-home price for all housing types in July was $234,000 – 5.6 percent above July 2014. July's price increase marks the 41st consecutive month of year-over-year gains.
"Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand," adds Yun. "Realtors in some markets reported slower foot traffic in July, in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains."
Total housing inventory at the end of July declined 0.4 percent to 2.24 million existing homes available for sale, and it's now 4.7 percent lower than a year ago (2.35 million). Unsold inventory grew even tighter. July saw a 4.8-month supply at the current sales pace, down from 4.9 months in June.
The percent share of first-time buyers declined in July for the second consecutive month, falling from 30 percent in June to 28 percent – the lowest share since January of this year (also 28 percent). A year ago, first-time buyers represented 29 percent of all buyers.
"The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face," adds Yun. "Rising rents and flat wage growth make it difficult for many to save for a downpayment, and the dearth of supply in affordable price ranges is limiting their options."
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage climbed to 4.05 percent in July from 3.98 percent in June – the first time above 4 percent since November 2014 (4.00 percent) and the highest since September 2014 (4.16 percent).
Properties typically stayed on the market for 42 days in July, an increase from June (34 days) but below the 48 days in July 2014. Short sales were on the market the longest at a median of 135 days in July, while foreclosures sold in 49 days and non-distressed homes took 41 days. Forty-three percent of homes sold in July were on the market for less than a month.
All-cash sales increased slightly to 23 percent of transactions in July (22 percent in June) but are down from 29 percent a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in July, up from 12 percent in June but down from 16 percent in July 2014. Sixty-four percent of investors paid cash in July.
Distressed sales – foreclosures and short sales – represented the lowest share since NAR began tracking in October 2008, declining to 7 percent in July from 8 percent in June. They were 9 percent a year ago. Five percent of July sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in July (15 percent in June), while short sales were discounted 12 percent (18 percent in June).
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says the housing market is in a much better place and has come a long way since the depths of the recession.
"Five years ago, distressed sales represented 33 percent of the market in July," Polychron says. "For many previously distressed homeowners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments."
Single-family and condo/co-op sales
Single-family home sales increased 2.7 percent to a seasonally adjusted annual rate of 4.96 million in July (highest since February 2007 at 5.08 million) from 4.83 million in June, and are now 11.0 percent above the 4.47 million pace a year ago. The median existing single-family home price was $235,500 in July, up 5.8 percent from July 2014.
Existing condominium and co-op sales fell 3.1 percent to a seasonally adjusted annual rate of 630,000 units in July from 650,000 units in June, but are still up 5.0 percent from July 2014 (600,000 units). The median existing condo price was $221,800 in July, which is 3.2 percent above a year ago.
July existing-home sales in the Northeast decreased 2.8 percent to an annual rate of 700,000, but they're still 9.4 percent above a year ago. The median price in the Northeast was $277,200, which is 1.3 percent higher than July 2014. In the Midwest, existing-home sales were at an annual rate of 1.32 million in July, unchanged from June and 10.9 percent above July 2014. The median price in the Midwest was $186,500, up 6.6 percent from a year ago.
Existing-home sales in the South increased 4.1 percent to an annual rate of 2.29 million in July, and are 9.6 percent above July 2014. The median price in the South was $203,500, up 7.0 percent from a year ago.
Existing-home sales in the West rose 3.2 percent to an annual rate of 1.28 million in July, and are 11.3 percent above a year ago. The median price in the West was $327,400, which is 8.4 percent above July 2014.
© 2015 Florida Realtors® Alll rights reserved. Reprinted with permission.
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