Existing home sales declined 2.3% in June 2014 from June 2013, reaching an annual pace of 5 million sales for the first time since October 2013, while rising inventory continues to push overall supply towards a more balanced market, according to the National Association of Realtors.
Sales are at the highest pace since October 2013, but remain 2.3% below the 5.16 million-unit level a year ago.
The downward pressure on existing home sales comes from the West, where sales remain 7.3% below June 2013.
Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, climbed 2.6% from May 2014 to a seasonally adjusted annual rate of 5.04 million.
Single-family home sales rose 2.5% to a seasonally adjusted annual rate of 4.43 million in June from 4.32 million in May, but remain 2.9% below the 4.56 million pace a year ago.
The median existing single-family home price was $224,300 in June, up 4.5% from June 2013.
Lawrence Yun, NAR chief economist, said housing fundamentals are moving in the right direction.
“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. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices,” he said. “On the contrary, new home construction needs to rise by at least 50% for a complete return to a balanced market because supply shortages – particularly in the West – are still putting upward pressure on prices.”
Last month, many suggested existing home sales "may" be on a comeback based on May data.
Existing home sales jumped 4.9% in May on top of April's 1.5% gain. This was the first back-to-back gain for this series going all the way back to April and May of last year.
May's annual rate of 4.89 million was plus 5.1% on a year-ago basis versus a minus 5.0% rate for April.
Tight supply and rising prices did not hold back sales in May. Supply at the current sales rate fell to 5.6 months from 5.7 months.
“This morning’s report shows a welcomed rise in sales activity after dipping to a 4.6M unit pace at the end of Q1,” said Lindsey Piegza, chief economist with Sterne Agee. “Still, even with the recent acceleration in demand, existing home sales remain well below the previous post-recession peak. Short-term fluctuations are expected particularly given the extreme weather at the start of the year, but longer-term, demand will be fueled by subsequent gains in jobs and income. However, at this point, income gains are noticeably lagging behind a rise in home prices which continues to squeeze out new demand, particularly amid the younger generations.”
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 said. “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% to 2.3 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% 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% above June 2013. This marks the 28th consecutive month of year-over-year price gains.
Distressed homes – foreclosures and short sales – accounted for 11% of June sales, down from 15% in June 2013. Eight percent of June sales were foreclosures and 3% were short sales.
Foreclosures sold for an average discount of 20% below market value in June, while short sales were discounted 11%.
The share of first-time buyers continues to underperform historically, rising slightly to 28% in June (27% in May), but remain at an overall average of 28% over the past year.
NAR President Steve Brown, co-owner of Irongate Realtors, said Realtors are reporting that some prospective buyers who have above-average credit scores but low down payments 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 home buyers.”
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% in June from 4.19% in May, and is the lowest since last June (4.07%).
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. Of homes that sold in June, 42% 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% of transactions, up from 31% in June 2013. Individual investors, who account for many cash sales, purchased 16% of homes in June, unchanged from May; they were 17% in June 2013. Last month 69% of investors paid cash.
Region Existing Home Breakdown