Home sales on the rise
As inventory of existing homes for sale remain tight and home prices continue to increase, it is a challenge for the industry to improve sales numbers, but according to the National Association of Realtors (NAR), completed transactions rose 6.5 percent in July, marking a 17.2 percent increase above July 2012. NAR reports that sales have now been above year-ago levels for 25 months.
Dr. Lawrence Yun, NAR chief economist, said, “Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines. The initial rise in interest rates provided strong incentive for closing deals. However, further rate increases will diminish the pool of eligible buyers.”
Although interest rates are impacting sales, Dr. Yun said there are factors that can sustain a continued recovery. “Although housing affordability conditions will become less attractive, jobs are being added to the economy, and mortgage underwriting standards should normalize over time from current stringent conditions as default rates fall.”
Housing inventory rose in July
In some cities, inventory levels are much lower than other metro areas, frustrating real estate professionals who for years have reported to us that getting a buyer qualified is their top challenge, now telling us that a lack of inventory is their primary challenge.
Listed inventory is 5.0 percent below a year ago, according to NAR. There appears to be slight relief, however, as the total housing inventory at the end of July rose 5.6 percent, representing a 5.1 month supply at the current sales pace, unchanged from June.
Dr. Yun commented, “Tight inventory in many areas means above-normal price growth for the foreseeable future.”
Home prices continue to rise
Rising 13.7 percent in July compared to a year ago, the national median existing home price hit $213,500, which is only 7.3 percent below the all-time record of $230,400 in July 2006.
July marks the 17th consecutive month of year-over-year price increases, which hasn’t happened since January 2005 to May 2006.
Distressed home sales match the lowest share of sales since NAR began tracking in October 2008, now accounting for 15 percent of sales, unchanged from June, down from 24 percent in July 2012. NAR reports that some of the price gains can be accounted for due to fewer distressed sales on the market pulling prices down.
Time on market actually went up
The median time on market for all homes was 37 days in June, but rose to 42 days in July, but this is still a dramatic improvement from the 69 day average in July 2012.
Short sales were on the market for a median of 72 days, while foreclosures typically sold in 50 days and non-distressed homes took 40 days.
Fewer first time buyers, more all-cash sales
First-time buyers accounted for 29 percent of purchases in July, unchanged from June, but are down from 34 percent in July 2012.
All-cash sales comprised 31 percent of transactions in July, the same as in June; they were 27 percent in July 2012. Individual investors, who account for many cash sales, purchased 16 percent of homes in July, down from 17 percent in June; they reached a cyclical peak of 22 percent in February of this year.
Sales in all regions increased in July
Regionally, existing-home sales in the Northeast surged 12.7 percent to an annual rate of 710,000 in July and are 20.3 percent above July 2012. The median price in the Northeast was $271,200, up 6.7 percent from a year ago.
Existing-home sales in the Midwest rose 5.8 percent in July to a pace of 1.28 million, and are 20.8 percent higher than a year ago. The median price in the Midwest was $168,300, which is 9.5 percent above July 2012.
In the South, existing-home sales increased 5.0 percent to an annual level of 2.11 million in July and are 16.6 percent above July 2012. The median price in the South was $183,400, up 13.6 percent from a year ago.
Existing-home sales in the West rose 6.6 percent to a pace of 1.29 million in July and are 13.2 percent higher than a year ago. The median price in the West, driven the most by a supply imbalance, was $287,500, which is 19.2 percent above July 2012.