It’s no shock that existing home sales increased again this month, marking the fourth consecutive month of increases, according to the National Association of Realtors.
What is new, however, is that these home sales were boosted by a flood of first-time homebuyers entering the market, the largest quantity in four years, in fact.
The Northeast was the only outlier, with a decline in closings in June as sales fell to their lowest overall share since July 2009.
“Sales of existing homes were unexpectedly strong in June, edging up for the fourth consecutive month to a nine-year high and defying expectations for a modest monthly decline,” Zillow Chief Economist Svenja Dudell said. “The gain is even more surprising given a continued shortage of homes available for sale, with inventory down almost 6% compared to the same time a year ago.”
The total existing home sales, completed transactions that include single-family homes, town homes, condominiums and co-ops, increased by 1.1% to a seasonally adjusted annual rate of 5.57 million in June, up from May’s downwardly revised 5.51 million.
Sales are now up 3% from June 2015, and remain at their highest annual pace since February 2007, when sales were at 5.79 million.
“Existing sales rose again last month as more traditional buyers and fewer investors were able to close on a home despite many competitive areas with unrelenting supply and demand imbalances,” NAR Chief Economist Lawrence Yun said. “Sustained job growth as well as this year’s descent in mortgage rates is undoubtedly driving the appetite for home purchases.”
On the other hand, there is a question about whether this pace can continue in the coming months.
“Looking ahead, it’s unclear if this current sales pace can further accelerate as record high stock prices, near-record low mortgage rates and solid job gains face off against a dearth of homes available for sale and lofty home prices that keep advancing,” Yun said.
The median existing home price in June hit $247,000, an increase of 4.8% annually, according to the report. June’s increase marks the 52nd month of annual increases, and even surpassed May’s peak median sales price of $238,900.
“Existing home sales edged out a small gain in June, helped by a rise in first-time buyer numbers,” Capital Economics Property Economist Matthew Pointon said. “But the months’ supply of homes for sale has fallen to its joint-lowest level for 11 years, and the recent drop in mortgage rates following the Brexit result has not given mortgage applications for home purchase a boost.”
“Therefore, it seems unlikely that existing home sales will continue to rise,” Pointon concluded.
Home prices continue to increase nationwide, even hitting new highs in several large housing markets in April, according to S&P Dow Jones Indices Case-Shiller Home Prices Indices released in June.
“Limited inventory and high prices will continue to hamper a full return to a normal market, especially given how good affordability is overall,” Gudell said. “This one-two punch of few homes for sale and rapidly rising prices is especially likely to impact markets in the west going forward.”
Inventory continues to be a problem as it dropped yet again in June 0.9% to 2.12 million homes available for sale. Inventory levels are now 5.8% below year-ago levels.
“Though June’s existing home sales numbers show that we’re about 95% back to the pre-recession average, there are many more households in the U.S. looking for homes than in the early 2000s,” Trulia Chief Economist Ralph McLaughlin said. “As such, a lack of supply continues to hold back homebuyers.”
Currently, inventory rests at a 4.6-month supply at the current sales pace, down from 4.7 months in May, the report stated.
“The month’s supply of existing homes in June 2016 was the lowest since June 2005,” McLaughlin said. “Homebuyers are finding little relief as the housing market recovery marches on.”
Privately owned housing starts in June showed an increase from May, but decreased from June 2015, according to the U.S. Department of Housing and Urban Development.
The share of first-time homebuyers increased to 33% in June, up from 30% in May and last year. First-time buyers now make up the highest share of the market since July of 2012 when they made up 34%. Through the first six months of the year, first-time buyers have represented an average of 31% of buyers; they were 30% in all of 2015.
“The modest bump in June sales to first-time buyers can be attributed to mortgage rates near all-time lows and perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way onto the market,” Yun said.
“The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply, particularly areas in the Midwest and parts of the South,” he said.
“A silver lining from tight inventory is that homes are selling faster, which benefits agents and sellers,” McLaughlin said. “Existing home sales per agent ticked up to the highest level since June 2015.”
Properties stayed on the market for an average of 34 days in June, the report stated. This was an increase from 32 days in May, but unchanged from last year. About 48% percent of homes sold in June were on the market for less than a month.