NAR: Existing-home sales up in June, unsold inventory shows progress
WASHINGTON – July 22, 2014 – Existing-home sales increased in June and reached an annual pace of 5 million sales for the first time since October 2013 as rising inventory continues to push overall supply towards a more balanced market, according to the National Association of Realtors® (NAR).
Total existing home sales – 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.
"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," NAR Chief Economist Lawrence Yun says. "This bodes well for rising home sales in the upcoming months as consumers are provided with more choices. … 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."
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).
NAR President Steve Brown said Realtors are reporting that some prospective buyers who have above average credit scores but low downpayments 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 homebuyers."
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage dropped for the second consecutive month to 4.16 percent in June from 4.19 percent in May, and is the lowest since last June (4.07 percent).
Properties sold faster for the sixth consecutive month in June, highlighting the fact that inventory is still lagging relative to demand. The median time on market for all homes was 44 days in June, down from 47 days in May; it was 37 days on market in June 2013. Short sales were on the market for a median of 120 days in June, while foreclosures sold in 54 days and non-distressed homes typically took 42 days.
Forty-two percent of homes sold in June were on the market for less than a month.
For the third consecutive month – as well as the average of the previous 12 months – all-cash sales in June were 32 percent of transactions, up from 31 percent in June 2013. Individual investors, who account for many cash sales, purchased 16 percent of homes in June, unchanged from May; they were 17 percent in June 2013. Sixty-nine percent of investors paid cash in June.
Single-family home sales rose 2.5 percent to a seasonally adjusted annual rate of 4.43 million in June from 4.32 million in May, but they remain 2.9 percent below the 4.56 million pace a year ago. The median existing single-family home price was $224,300 in June, up 4.5 percent from June 2013.
Existing condominium and co-op sales increased 3.4 percent to a seasonally adjusted annual rate of 610,000 units in June from 590,000 in May, and they're 1.7 percent above the 600,000 unit pace a year ago. The median existing condo price was $215,700 in June, which is 3.2 percent higher than a year ago.
Regionally, existing-home sales in the Northeast rose 3.2 percent to an annual rate of 640,000 in June but are 3.0 percent below a year ago. The median price in the Northeast was $269,800, slightly below (0.1 percent) June 2013.
In the Midwest, existing-home sales jumped 6.2 percent to an annual rate of 1.20 million in June, but remain 2.4 percent below June 2013. The median price in the Midwest was $177,900, up 4.6 percent from a year ago.
Existing-home sales in the South inched 0.5 percent higher to an annual level of 2.06 million in June, and are up 1.0 percent from June 2013. The median price in the South was $192,600, up 3.4 percent from a year ago.
Existing-home sales in the West rose 2.7 percent to an annual rate of 1.14 million in June, but remain 7.3 percent below a year ago. The median price in the West was $301,000, which is 7.2 percent above June 2013.© 2014 Florida Realtors®