A note to clients from Sterne Agee reports on the state of the homebuilder market, which shows housing continues to struggle against falling inventories and subpar sales.

Sterne Agee analyst Jay McCanless runs through pending home sales, existing home sales, housing inventory, and price growth, painting a comprehensive picture of where the housing market is at mid-year 2014.

Local completed and pending home sales comparisons were above the national numbers in June, McCanless reports.

Existing home sales during June surpassed the national market with a 2.5% year-over-year (Y/Y) increase versus 1.2% Y/Y growth for the national metric. Sarasota, Austin, and Fort Myers reported the highest Y/Y growth in unit sales at 10.2%, 11.3%, and 15.3%, respectively.

As for pending sales, “Approximately 18 of the 25 markets we monitor provide monthly pending home sales, which are open contracts to buy a home that have not closed by the end of the month. Pending sales for these 18 markets increased by an average of +1.0% Y/Y in June, versus a -4.5% Y/Y decline nationally. Nine of these 18 markets had a positive Y/Y% comparison in June, and three of these (Charleston, Denver, and Jacksonville) are in their third consecutive month of positive Y/Y growth,” McCanless reports in his note.

Inventory on a “months to sell” basis declined month-over-month and was below national numbers. 

“Historically, markets with less than six months of inventory to sell have been sellers' markets, which have provided homebuilders and existing home sellers the opportunity to raise prices,” he writes. “June's average months to sell reading was 4.0 in the Top 25 markets, versus May's reading of 4.1, and lower than June's national average of 5.5. Gross inventory in our Top 25 markets increased 11.7% Y/Y for June, versus a 6.5% Y/Y increase in national inventory levels.”

The Houston, Denver, and Dallas markets reported the largest decline in June's inventory levels, falling 6.1%, 6.7%, and 6.8% Y/Y, respectively.

The average median price growth in the top 25 markets was 400 bp ahead of national numbers in June. 

“We monitor existing home price trends because we believe builder pricing power is currently a function of scarcity and local market price growth. Median Y/Y price growth averaged 7.1% this month for our Top 25 markets versus 3.1% Y/Y price growth for national existing home sales. Las Vegas and Inland Empire experienced the highest Y/Y median price growth in June, rising 14.2% and 14.8%, respectively,” he said.