Existing Home Sales Rise Despite Tightening Inventories
Sales of existing homes increased nationally in July to a seasonally adjusted annual rate of 4.47 million units. This is an increase of 2.3 percent from the 4.37 million rate set in June and 10.4 percent higher than 4.05 million in July 2011. The national median price of existing homes also rose on an annual basis for the fifth consecutive month according to data released today by the National Association of Realtors®.
Existing home sales are completed transactions of single-family homes, condominiums, townhouses, and cooperative apartments. The increased sales were noted in every region but the West where inventories are reported to be very tight.
Single-family home sales increased 2.1 percent to a seasonally adjusted annual rate of 3.98 million in July from 3.90 million in June, and are 9.9 percent above the 3.62 million-unit level in July 2011. Existing condominium and co-op sales rose 4.3 percent to a seasonally adjusted annual rate of 490,000 in July from 470,000 in June, and are 14.0 percent higher than the 430,000-unit pace a year ago.
On a non-seasonally adjusted basis there were a total of 429,000 homes sold in July, down from 463,000 in June. Single-family home sales totaled 378,000 compared to 416,000 a month earlier.
The median price for an existing home sold in July was $187,300, up 9.4 percent from $171,200 a year earlier. This is the first time there have been five consecutive months with year-over-year price increases since May 2006. July's increase was also the strongest since January 2006 when the median annual increase was 10.2 percent.
The median existing single-family home price was $188,100 in July, up 9.6 percent from a year ago. The median existing condo price was $180,700 in July, which is 7.7 percent above July 2011.
NAR President Moe Veissi said pricing is the primary factor in determining how long homes stay on the market. "Fully one-third of homes purchased in July were on the market for less than a month, and only 21 percent were on the market for six months or longer. "Correctly priced homes, regardless of price range, are selling quickly these days,"
Distressed homes constituted 24 percent of the sales in July and were evenly divided between foreclosures and short sales. This is down slightly from 25 percent the previous month and 29 percent a year earlier. Foreclosures sold for an average discount of 17 percent below market value in July, while short sales were discounted 15 percent.
First-time buyers accounted for 34 percent sales in July, up from 32 percent in June; they were also 32 percent in July 2011. Under normal conditions, entry-level buyers account for closer to 40 percent of the market.
All-cash sales slipped to 27 percent of transactions in July from 29 percent both in June and in July 2011. Investors, who account for the bulk of cash sales, purchased 16 percent of homes in July, down from 19 percent in June and 18 percent in July 2011.
Lawrence Yun, NAR chief economist said, "Fewer sales in the lower price ranges are contributing to stronger increases in the median price, but all of the home price measures now are showing positive movement and that is building confidence in the market. Furthermore, the higher median price naturally means more housing contribution to economic growth."
Total housing inventory at the end July increased 1.3 percent to 2.40 million existing homes available for sale, a 6.4-month supply at the current sales pace, down from a 6.5-month supply in June. Listed inventory is 23.8 percent below a year ago when there was a 9.3-month supply. However, while available single-family homes fell 3.1 percent to a 6.3 month supply the inventory of condos for sale rose 8.8 percent to a 7.4 month supply, the highest since April.
Yun said there are distortions in this inventory. "The total supply of housing inventory appears to be balanced in historic terms, but there are notable shortages in the lower price ranges which are limiting opportunities for first-time buyers," he said. "The low price ranges also are popular with investors, so entry-level buyers are at a disadvantage because many investors are making all-cash offers." NAR is asking the government to expeditiously release the foreclosed properties it owns in inventory-constrained markets.
Yun said housing affordability conditions and low rates coupled with faster rising rents are helping to unleash a pent-up demand. "However, the market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions." Yun said existing-home sales could be in a normal range of 5 to 5.5 million if all conditions were optimal. "Sales may reach 5 million next year, but it will require more sensible lending standards and stronger job creation to push beyond that."
Regionally, existing-home sales in the Northeast rose 7.4 percent to an annual level of 580,000 in July and are 13.7 percent above July 2011. The median price in the Northeast was $254,200, up 3.5 percent from a year ago.
Sales in the Midwest increased 2.0 percent in July to 1.04 million and are 16.9 percent higher than a year ago. The median price in the Midwest was $154,100, up 5.8 percent from July 2011.
Existing-home sales rose 2.3 percent to an annual level of 1.77 million in the South in July and are 8.6 percent above July 2011. The median price in the region was $162,600, up 6.6 percent from a year ago.
Existing-home sales in the West were unchanged at an annual pace of 1.08 million in July but are 5.9 percent higher than a year ago. With pronounced inventory shortages, the median price in the West was $238,600, a jump of 24.5 percent from July 2011.