Existing home sales fell for the fourth consecutive month in July, marking the slowest pace in growth within the last two years, according to the latest report from the National Association of Realtors.
Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 0.7% to a seasonally adjusted annual rate of 5.34 million in July. This is down from a downwardly revised 5.38 million in June.
Sales are now 1.5% below June 2017's rate and have fallen on an annual bias for five consecutive months, the report showed.
NAR Chief Economist Lawrence Yun said the continuous solid gains in home prices have now steadily reduced homebuyer demand.
“Led by a notable decrease in closings in the Northeast, existing home sales trailed off again last month, sliding to their slowest pace since February 2016 at 5.21 million,” Yun said. “Too many would-be buyers are either being priced out or are deciding to postpone their search until more homes in their price range come onto the market.”
The median existing home price for all housing types increased to $269,600 and surpassing last July’s $258,100. This is a 4.5% increase from July last year and marks the 77th straight month of year-over-year gains.
Total housing inventory slipped 0.5% at the end of July to 1.92 million existing homes available for sale and is unchanged from last year’s total. Unsold inventory rests at a 4.3-month supply at the current sales pace, also remaining unchanged from last year’s total.
“Listings continue to go under contract in under month, which highlights the feedback from Realtors that buyers are swiftly snatching up moderately-priced properties,” Yun said. “Existing supply is still not at a healthy level, and new home construction is not keeping up to meet demand.”
Properties stayed on the market an average of 27 days in July, rising from 26 in June but still down from 30 days in 2017. The report states that 55% of homes stayed on the market for less than a month.
The percentage of first-time homebuyers remained unchanged from the previous month at 31% but is still down from 32% from a year ago.
The report states, the average commitment rate for a 30-year, conventional, fixed-rate mortgage fell from 4.57% the month prior to 4.53% in July, and the average commitment rate for all of 2017 was 3.99%, according to Freddie Mac.
“In addition to the steady climb in home prices over the past year, it’s evident that the quick run-up in mortgage rates earlier this spring has had somewhat of a cooling effect on home sales,” Yun said. “This weakening in affordability has put the most pressure on would-be first-time buyers in recent months, who continue to represent only around a third of sales despite a very healthy economy and labor market.”
First-time buyers were 32% of sales in July, which is an increase from 31% in June but still down from 33% in 2017.
“Despite first-time buyers struggling to achieve homeownership, Realtors in most areas say demand is still the strongest at the entry-level segment of the market,” NAR President Elizabeth Mendenhall said. “For prospective first-timers looking to begin their home search this fall, it is expected that competition will remain swift.”
Mendenhall suggests prospective first-timers should expect that competition will remain swift this fall and encourages them to be fully prepared with a pre-approval from a lender.
Regionally, all major regions decreased in sales but the Western region.
Existing home sales in the Northeast fell 8.3% to an annual rate of 660,000 in July and is 1.5% below a year ago. The median price in the Northeast rose 6.8% from June 2017 and came in at $309,700.
In the Midwest, existing-home sales fell 1.6% to an annual rate of 1.25 million in July and are 0.8% below June 2017. The median price in the Midwest was $210,500, increasing 2.5% from this time last year.
Southern existing-home sales inched back 0.4% to an annual rate of 2.24 million in July, and sales are 0.4% below a year ago. The median price in the South was $233,400, increasing 2.7% from July 2017.
Existing home sales in the West climbed 4.4% to an annual rate of 1.19 million in July but is still 4% below July 2017. The median price in the West was $392,700, increasing 5.1% from this time last year.