Sales bounce back after dwindling for four consecutive months
Existing-home sales edged up 1.4% in June, ending a four-month streak of declines, data from the National Association of Realtors revealed Thursday.
Fueled by an improvement in supply conditions and low mortgage rates, sales increased 1.4% month over month to an annualized rate of 5.86 million. Year over year, existing-home sales climbed 22.9% from 4.77% million in June 2020.
“Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales,” said NAR chief economist Lawrence Yun. “Home sales continue to run at a pace above the rate seen before the pandemic.”
Joel Kan, AVP of economic and industry forecasting at the Mortgage Bankers Association, backed Yun’s statement, citing data from the US Census Bureau.
“There was an improvement in the very tight supply conditions seen over the past year. Inventory increased 3% last month, helped by more homeowners listing their home for sale,” he said. “Additional data from the US Census Bureau yesterday showed that the homebuilding sector is also trying to keep up with demand.”
New residential construction accelerated 6.3% last month to a 1.64-million-unit rate. At the end of June, housing inventory totalled 1.25 million units, up 3.3% from May’s inventory and down 18.8% from last year’s 1.54 million rate. Unsold inventory sits at a 2.6-month supply at the current sales pace, slightly up from May’s 2.5-month supply but down from 3.9 months in June 2020.
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With more available homes for sale, potential buyers have better chances of entering the market. However, a big hurdle remains.
“The median sales price jumped 23% from a year ago to $363,300 – setting another record high. This is an indication that affordability challenges persist for many potential buyers,” Kan said. “Our data on mortgage applications show that purchase activity has moved lower since March, while the average loan size has stayed elevated, consistent with the elevated share of all-cash sales and higher median prices reported by NAR.”
“Huge wealth gains from both housing equity and the stock market have nudged up all-cash transactions, but first-time buyers who need mortgage financing are being uniquely challenged with record-high home prices and low inventory,” Yun explained. “Although rates are favorably low, these hurdles have been overwhelming to some potential buyers.”
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“At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year,” Yun added. “Ideally, the costs for a home would rise roughly in line with income growth, which is likely to happen in 2022 as more listings and new construction become available.”
