Low Rates "Nudged" Existing Home Buyers NAR says
Existing home sales returned to an upward track in July after dipping 1.7 percent in June. The National Association of Realtors® (NAR) said pre-owned single-family homes, townhomes, condominiums, and cooperative apartments sold at a seasonally adjusted annual rate of 5.42 million units during the month, a 2.5 percent increase from the 5.270-million-unit rate in June. The July sales were 0.6 percent higher than the 5.39 million pace set in July 2018, the first time this year that 2019 sales exceeded those a year earlier.
Sales were toward the high end of the range of estimates from analysts polled by Econoday, 5.25 million to 5.50 million and beat the consensus estimate of 5.39 million units.
Single-family homes sold at a seasonally adjusted rate of 4.84 million, a 2.8 percent increase from June and were up 1.0 percent from sales a year earlier. Condos and co-ops had an annual sales rate of 580,000 units, essentially unchanged from June but 3.3 percent lower than in July 2018.
"Falling mortgage rates are improving housing affordability and nudging buyers into the market," said Lawrence Yun, NAR's chief economist. However, he added that the supply of affordable housing is severely low. "The shortage of lower-priced homes have (sic) markedly pushed up home prices."
The median price of homes sold during the month was $280,800, representing an annual increase of 4.3 percent from the July 2018 median of $269,300. NAR said it was the 89th straight month of year-over-year gains. The median existing single-family home price gained 4.5 percent to $284,000 and the existing condo price rose 2.5 percent to $254,300.
Home price appreciation has been much stronger in the lower-price tier compared to homes sold in the upper-price tier, Yun said. He cited analyses by Black Knight and Realtors Property Resource which found that homes in the lower half of the market in 13 large metro areas homes that sold in both 2012 and 2018 had appreciated by more than 100 percent. Examples include the Atlanta area, up 165 percent, Denver 103 percent, Miami and Tampa, up 119 percent and 125 percent respectively. Repeat sales analysis of homes in the upper half of the market increased at a much slower rate.
Yun said, "Clearly, the inventory of moderately-priced homes is inadequate and more home building is needed. Some new apartments could be converted into condominiums thereby helping with the supply, especially in light of new federal rules permitting a wider use of Federal Housing Administration (FHA) mortgages to buy condo properties."
Housing inventory fell from the estimated 1.92 million existing homes that were available for sale in both June and in July 2018 declined 1.6 percent to 1.89 million last month. The unsold inventory represents a 4.2-month supply at the current sales rate, a slight decrease from the two earlier periods. Properties typically remained on the market for 29 days in July, up from 27 days in June and up from 27 days in July of 2018. Fifty-one percent of homes sold in July were on the market for less than a month.
First-time buyers were responsible for 32 percent of sales in July, down from 35 percent the month prior and about the same as the first-time buyer share a year ago. Investors and second-home buyers accounted for 11 percent of sales and 19 percent of transactions were all-cash. Distressed sales had only a 2.0 percent market share.
NAR President John Smaby said the current low interest rates have opened the market for a number of potential buyers who couldn't afford a home just a year ago. "Additionally, NAR has been working with the FHA for years to establish new condominium loan policies. Our hard work has paid off, and this change will begin benefiting buyers, sellers and our members as soon as this fall," he said.
Sales improved in three of the four regions, with the exception being the Northeast. The annual sales rate there was down 2.9 percent to 660,000, a 4.3 percent year-over-year decline. The median price was also lower, down 1.0 percent on an annual basis to a median of $305,800.
In the Midwest, existing-home sales edged up 1.6 percent to an annual rate of 1.27 million, a 0.8 percent increase from the prior July. The median price surged 8.1 percent to $226,300.
Sales in the South rose 1.8 percent to an annual rate of 2.31 million and were 2.7 percent higher on an annual basis. The median price increased 5.2 percent to $245,100.
Existing home sales shot up by 8.3 percent in the West to an annual rate of 1.18 million in July but remained 0.8 lower than a year earlier. Prices were up 3.7 percent to a median of $408,000.