During the month of June, existing-home sales reached an annual pace of 5 million sales for the first time since October 2013, according to data recently released by the National Association of REALTORS®. In addition to the heightened existing-home sales, rising inventory continued to move the housing supply forward, signaling a strengthened and more balanced market.
Lawrence Yun, NAR chief economist, says housing fundamentals are moving in the right direction. “Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices,” he says. “On the contrary, new home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages—particularly in the West—are still putting upward pressure on prices.”
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, climbed 2.6 percent to a seasonally adjusted annual rate of 5.04 million in June from an upwardly-revised 4.91 million in May. Sales are at the highest pace since October 2013 (5.13 million), but remain 2.3 percent below the 5.16 million-unit level a year ago.
Yun also noted that stagnant wage growth is holding back what should be a stronger pace of sales. “Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month,” he says. “However, the lack of wage increases is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability.”
Total housing inventory at the end of June rose 2.2 percent to 2.30 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace, unchanged from May. Unsold inventory is 6.5 percent higher than a year ago, when there were 2.16 million existing homes available for sale.
The median existing-home price for all housing types in June was $223,300, which is 4.3 percent above June 2013. This marks the 28th consecutive month of year-over-year price gains.
Distressed homes—foreclosures and short sales—accounted for 11 percent of June sales, down from 15 percent in June 2013. Eight percent of June sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 20 percent below market value in June, while short sales were discounted 11 percent.
The percent share of first-time buyers continues to underperform historically, rising slightly to 28 percent in June (27 percent in May), but remain at an overall average of 28 percent over the past year.
NAR President Steve Brown says REALTORS® are reporting that some prospective buyers who have above average credit scores but low down payments are deterred from homeownership by the high cost of FHA mortgage insurance. “Access to affordable credit continues to hamper young, prospective first-time buyers,” added Brown. “NAR recommends that FHA reduce high annual mortgage insurance premiums for all qualified homebuyers and eliminate the insurance requirement for the life of the loan. FHA’s HAWK program is a good start, but it should offer further reductions for participating home buyers.”