Existing Home Sales "Cooled" in Q2, Prices Did Not

The National Association of Realtors® (NAR) said existing home sales cooled during the second quarter amidst what it called "staggeringly low" inventories and steadily appreciating prices. The median national price of an existing single-family home in the second quarter was $269,000, which is up 5.3 percent from the second quarter of 2017 ($255,400) and surpasses that number as the new peak. The median sales price during this year's first quarter rose 5.7 percent on an annual basis.  

NAR's quarterly existing home sales report focuses on major metropolitan markets, and the second quarter edition says that single-family home prices increased during the period in 90 percent of measured markets.  Sales prices gained year-over-year in 161 out of 178 metropolitan statistical areas (MSAs) tracked by the association. Twenty-four metro areas (13 percent) experienced double-digit increases, down from 30 percent in this year's first quarter and the San Francisco MSA joined that of San Jose with a median sales price above $1 million. 

Lawrence Yun, NAR chief economist, says, despite the strong buyer demand, this year's spring buying season did not meet expectations.   "The ongoing supply crunch affecting much of the country worsened for most of the second quarter, as the growing number of interested buyers in many markets overwhelmed what was already a meager level of available listings," he said. "With not enough homes for sale, multiple bids caused prices to rise briskly and further out of the reach of some prospective buyers."

Total existing-home sales, including single family and condos, were at a seasonally adjusted annual rate of 5.41 million units during the quarter, down 1.7 percent from 5.51 million in the first quarter.  Sales are 2.4 percent lower than the 5.55 million pace during the second quarter of 2017. 

"Solid economic growth, a healthy labor market and the large millennial population should be driving home sales much higher," said Yun. "As long as economic conditions maintain current levels, there's still a chance for sales to break out this year. However, with mortgage rates trending higher, it will only happen if supply levels improve enough to cool the speedy price growth in a majority of the country."  

Inventory levels did increase slightly from the second quarter of last year, rising 0.5 percent to 1.95 million homes for sale. The average supply during the second quarter was 4.1 months compared to an average of 4.2 months in the previous second quarter.

While the national family median income did rise to $75,106 in the second quarter, overall affordability declined due to higher prices and interest rates. To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $64,239, a 10 percent down payment would require an income of $60,858, and $54,096 would be needed for payments after a 20 percent down payment.

"The unaffordable conditions in many of the largest metro areas - especially in the West - continues to be a growing concern for many middle-class households aspiring to buy a home," said Yun. "Homebuilders, facing higher costs and labor shortages, are simply not producing enough affordable homes to satisfy demand. Local governments need to acknowledge this glaring issue and ease some of the zoning laws, permitting processes and regulations that are slowing construction." 

Four of the five most expensive housing markets were in California.  The San Jose MSA led with a median existing single-family price of $1,405,000.  San Francisco-Oakland-Hayward followed at $1,070,000; Anaheim-Santa Ana-Irvine had a median of $830,000 and San Diego-Carlsbad was fifth at $645,000.  Urban Honolulu was the fourth most expensive at a median of $795,200;

At the other end of the spectrum were Youngstown-Warren-Boardman, at $94,400; Cumberland (Maryland), $94,900; Decatur, $96,900; Elmira, $106,300; and Erie, at $121,700.

NAR tracks condo and cooperative prices in 61 metro areas.  It found the national median existing-condo price was $248,200 in the second quarter, up 3.6 percent from the second quarter of 2017 ($239,600). Ninety percent of metro areas showed gains in median condo price from a year ago.

Second quarter sales were mixed across regions, but all four posted price gains. Sales in the Northeast were unchanged from the first quarter at an annual rate of 683,000 and down 8.9 percent from a year ago. The median existing single-family home price in the Northeast rose 2.3 percent on an annual basis to $288,900.  

In the Midwest sales were up 1.6 percent quarter-over-quarter but were 2.8 percent below a year ago. The median home price grew 3.5 percent to $210,600.  

The South saw sales down 2.7 percent in the second quarter, but the region held on to an 0.6 percent edge year-over-year. The median existing single-family home price in the South was $238,500 in the second quarter, 4.0 percent above a year earlier.

Existing-home sales in the West were lower for both the quarter and the year, down 4.1 percent and 3.6 percent respectively.  The median existing single-family home price increased 8.3 percent to $403,300.   

NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series dates back to 1989.