Sales of existing homes rose in July even with constraints of affordable inventory, and the national median price is showing five consecutive months of year-over-year increases, according to the National Association of Realtors (NAR). Monthly sales rose in every region but the West, where inventory remains extremely tight. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 2.3 percent to a seasonally adjusted annual rate of 4.47 million in July from 4.37 million in June, and are 10.4 percent above the 4.05 million-unit pace in July 2011.
“Mortgage interest rates have been at record lows this year while rents have been rising at faster rates. Combined, these factors are helping to unleash a pent-up demand,” said Lawrence Yun, NAR chief economist. “However, the market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions.”
NAR is asking the government to expeditiously release the foreclosed properties it owns in inventory-constrained markets. Given population and demographic demand, Yun said existing-home sales could be in a normal range of five to 5.5 million if all conditions were optimal.
“Sales may reach five million next year, but it will require more sensible lending standards and stronger job creation to push beyond that,” said Yun.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.55 percent in July from 3.68 percent in June; the rate was 4.55 percent in July 2011; recordkeeping began in 1971.
“Fewer sales in the lower price ranges are contributing to stronger increases in the median price, but all of the home price measures now are showing positive movement and that is building confidence in the market,” Yun said. “Furthermore, the higher median price naturally means more housing contribution to economic growth.”
The national median existing home price for all housing types was $187,300 in July, up 9.4 percent from a year ago. The last time there were five back-to-back monthly price increases from a year earlier was in January to May of 2006. The July gain was the strongest since January 2006 when the median price rose 10.2 percent from a year earlier.
Distressed homes—foreclosures and short sales sold at deep discounts—accounted for 24 percent of July sales (12 percent were foreclosures and 12 percent were short sales), down from 25 percent in June and 29 percent in July 2011. Foreclosures sold for an average discount of 17 percent below market value in July, while short sales were discounted 15 percent.
“Correctly priced homes, regardless of price range, are selling quickly these days,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc. in Miami.
Total housing inventory at the end July increased 1.3 percent to 2.40 million existing homes available for sale, which represents a 6.4-month supply at the current sales pace, down from a 6.5-month supply in June. Listed inventory is 23.8 percent below a year ago when there was a 9.3-month supply.
“The total supply of housing inventory appears to be balanced in historic terms, but there are notable shortages in the lower price ranges which are limiting opportunities for first-time homebuyers,” said Yun. “The low price ranges also are popular with investors, so entry-level buyers are at a disadvantage because many investors are making all-cash offers.”
First-time homebuyers accounted for 34 percent of purchasers in July, up from 32 percent in June; they were also 32 percent in July 2011. Under normal conditions, entry-level buyers account for four out of 10 purchases. All-cash sales slipped to 27 percent of transactions in July from 29 percent in June; they were 29 percent in July 2011. Investors, who account for the bulk of cash sales, purchased 16 percent of homes in July, down from 19 percent in June; they were 18 percent in July 2011.
Single-family home sales increased 2.1 percent to a seasonally adjusted annual rate of 3.98 million in July from 3.90 million in June, and are 9.9 percent above the 3.62 million-unit level in July 2011. The median existing single-family home price was $188,100 in July, up 9.6 percent from a year ago.
Existing condominium and co-op sales rose 4.3 percent to a seasonally adjusted annual rate of 490,000 in July from 470,000 in June, and are 14.0 percent higher than the 430,000-unit pace a year ago. The median existing condo price was $180,700 in July, which is 7.7 percent above July 2011.
Regionally, existing-home sales in the Northeast rose 7.4 percent to an annual level of 580,000 in July and are 13.7 percent above July 2011. The median price in the Northeast was $254,200, up 3.5 percent from a year ago. Existing-home sales in the Midwest increased two percent in July to a pace of 1.04 million and are 16.9 percent higher than a year ago. The median price in the Midwest was $154,100, up 5.8 percent from July 2011. In the South, existing-home sales rose 2.3 percent to an annual level of 1.77 million in July and are 8.6 percent above July 2011. The median price in the region was $162,600, up 6.6 percent from a year ago. Existing-home sales in the West were unchanged at an annual pace of 1.08 million in July but are 5.9 percent higher than a year ago. With pronounced inventory shortages, the median price in the West was $238,600, a jump of 24.5 percent from July 2011.
