June Existing Home Sales Surge As Prices Hit New Record High

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales improved 3.2 percent or 170k in June to a seasonally adjusted annual rate of 5.49 million, the fastest pace since July 2007
  • May sales pace was revised downward to 5.32 million from the originally reported 5.35 million
  • Median price of an existing single family home rose for the fifth straight month, up $7,500 to $236,400 – highest on record, surpassing the July 2006 high of $230,300.
  • Median price is up 6.5% year-year, 40th straight month of year-year price improvement.
  • Number of homes available for sale rose 20k to 2.30 million, highest since last August (2.33 million)
  • June inventory computed to a 5.0 month supply of homes for sale, down from 5.1 month supply in May and from 5.5 month supply in June 2014

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Facing the prospect of higher interest rates, homebuyers flooded the market pushing existing home sales, closings, to their highest level in almost eight years according to new data from the National Association of Realtors (NAR). The spurt of activity could represent a renewed interest in homeownership, which has been waning, or from increased choice as supply of home for sale rose for the 10th straight month.

Nevertheless boom times have returned for realtors and for mortgage bankers, according to the NAR report .

The sales boost was presaged by NAR’s pending home sales report two months ago which showed sales contracts had increased 2.7 percent in April. Contracts increased 0.9 percent in May suggesting the wave of strong increases in closings may be coming to an end, especially if the Federal Open Market Committee increases the target fed funds rate. The FOMC meets next week but is widely not expected to act on rates until September.

That said, just the specter of higher rates – although the fed funds rate has no direct impact on mortgage rates – could be enough to move fence-sitters to act. The hurdles faced by would-be home buyers – slowly improving incomes and heavy student debt burdens – have not evaporated.  And, the number of households in the country at the end of the first quarter, 116.12 million, was down 0.6 percent from the end of the fourth quarter, 116.83 million, though it was up 1.3 percent from the end of the first quarter of 2014. New estimates of the number of households will be released by the Census Bureau next Tuesday.

According to Freddie Mac, the average rate for a 30-year, conventional, fixed-rate mortgage rose in June to 3.98 from 3.84 percent in May, though it remained below 4.00 percent for the seventh straight month. All cash sales, NAR said, dropped in June to the lowest share since December 2009, 22 percent of all transactions from 24 percent in May.

The inventory of homes for sale inched up in June, but was below the peak of 2.79 million in September 2005. By the time the Recession began in December 2007, the inventory of homes for sale had plunged to 1.98 million.

The percent share of first-time buyers, according to the NAR, fell to 30 percent in June from 32 percent in May, though it was at or above 30 percent for the fourth consecutive month. A year ago, first-time buyers represented 28 percent of the market, NAR reported.

Hear Mark Lieberman every Friday, on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, at 6:20 am Eastern Time. You can follow him on Twitter at @foxeconomics.

 

 

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