Existing-home sales increased in June to their highest pace in over eight years, while the cumulative effect of rising demand and limited supply helped push the national median sales price to an all-time high, according to the National Association of REALTORS®. All major regions experienced sales gains in June and have now risen above year-over-year levels for six consecutive months.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 3.2 percent to a seasonally adjusted annual rate of 5.49 million in June from a downwardly revised 5.32 million in May. Sales are now at their highest pace since February 2007 (5.79 million), have increased year-over-year for nine consecutive months and are 9.6 percent above a year ago (5.01 million).
Lawrence Yun, NAR chief economist, says backed by June’s solid gain in closings, this year’s spring buying season has been the strongest since the downturn. “Buyers have come back in force, leading to the strongest past two months in sales since early 2007,” he says. “This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.”
Adds Yun, “June sales were also likely propelled by the spring’s initial phase of rising mortgage rates, which usually prods some prospective buyers to buy now rather than wait until later when borrowing costs could be higher.”
“We’ve now surpassed the strong level of activity in 2013 that was investor driven and composed of 90 percent more distressed sales than exist today,” says realtor.com Chief Economist Jonathan Smoke. “This is therefore the biggest and healthiest year for existing home sales since 2006 when speculation was rampant.
The median existing-home price for all housing types in June was $236,400, which is 6.5 percent above June 2014 and surpasses the peak median sales price set in July 2006 ($230,400). June’s price increase also marks the 40th consecutive month of year-over-year gains.
Total housing inventoryat the end of June inched 0.9 percent to 2.30 million existing homes available for sale, and is 0.4 percent higher than a year ago (2.29 million). Unsold inventory is at a 5.0-month supply at the current sales pace, down from 5.1 months in May.
“Limited inventory amidst strong demand continues to push home prices higher, leading to declining affordability for prospective buyers,” says Yun. “Local officials in recent years have rightly authorized permits for new apartment construction, but more needs to be done for condominiums and single-family homes.”
The percent share of first-time buyers fell to 30 percent in June from 32 percent in May, but remained at or above 30 percent for the fourth consecutive month. A year ago, first-time buyers represented 28 percent of all buyers.
“Strong home resale numbers throughout the spring and into summer are welcome news to those who feared the housing market was a weak point in the overall economy,” says Quicken Loans Vice President Bill Banfield. “As housing numbers trend more and more positive, the Fed will become increasingly comfortable in beginning to raise rates and those who purchase a home now will likely be very happy they acted.”
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage rose in June to 3.98 from 3.84 percent in May, but remained just below 4.00 percent for the seventh straight month.
Properties typically stayed on the market for 34 days in June, down from May (40 days) and the shortest time since NAR began tracking in May 2011. Short sales were on the market the longest at a median of 129 days in June, while foreclosures sold in 39 days and non-distressed homes took 33 days. Forty-seven percent of homes sold in June were on the market for less than a month – the highest percentage since June 2013 (also 47 percent).
NAR President Chris Polychron says REALTORS® are reporting drastic imbalances of supply in relation to demand in many metro areas – especially in the West. “The demand for buying has really heated up this summer, leading to multiple bidders and homes selling at or above asking price,” he says. “Furthermore, tight inventory conditions are being exacerbated by the fact that some homeowners are hesitant to sell because they’re not optimistic they’ll have adequate time to find an affordable property to move into.”
Matching the lowest share since December 2009, all-cash sales were 22 percent of transactions in June, down from 24 percent in May and 32 percent a year ago. Individual investors, who account for many cash sales, purchased 12 percent of homes in June (14 percent in May) – the lowest since August 2014 (also 12 percent) and down from 16 percent in June 2014. Sixty-six percent of investors paid cash in June.
Distressed sales – foreclosures and short sales – fell to 8 percent in June (matching an August 2014 low) from 10 percent in May, and are below the 11 percent share a year ago. Six percent of June sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 15 percent below market value in June (unchanged from May), while short sales were discounted 18 percent (16 percent in May).
Single-family and Condo/Co-op Sales
Single-family home sales increased 2.8 percent to a seasonally adjusted annual rate of 4.84 million in June from 4.71 million in May, and are now 9.8 percent above the 4.41 million pace a year ago. The median existing single-family home price was $237,700 in June, up 6.6 percent from June 2014 and surpassing the peak median sales price set in July 2006 ($230,900).
Existing condominium and co-op sales rose 6.6 percent to a seasonally adjusted annual rate of 650,000 units in June from 610,000 units in May, up 8.3 percent from June 2014 (600,000 units) and the highest pace since May 2007 (680,000 units). The median existing condo price was $226,500 in June, which is 5.5 percent above a year ago and the highest since August 2007 ($229,200).
“The increase in sales we’re seeing is consistent with the strong and growing demand we’ve been monitoring all year and we anticipate sales will increase as the summer progresses particularly with our expectations of growing millennial participation in the housing market. Dragging this momentum is continued relative tight supply,” says Smoke. “Whereas inventory increased for the fourth straight month to 2.3 million units and this higher level of supply is enabling more sales, it’s not enough to dramatically change the months of supply, now at five months. Marking the 34th straight month of supply under six months, real relief from supply pressure has to come from new construction. Further, with relatively tight supply, the year over year price appreciation is now at 6.5 percent, still well above normal. This also follows what we’ve seen with year-over-year list prices moderating over the last three months but still high at six percent in June.
“While the market remains tight and favors sellers, the higher prices should encourage more would-be sellers and more new construction in the months ahead, lending further momentum to the market’s positive trend.”
Regional Breakdown
June existing-home sales in the Northeast climbed 4.3 percent to an annual rate of 720,000, and are now 12.5 percent above a year ago. The median price in the Northeast was $281,200, which is 3.9 percent higher than June 2014.
In the Midwest, existing-home sales rose 4.7 percent to an annual rate of 1.33 million in June, and are 12.7 percent above June 2014. The median price in the Midwest was $190,000, up 7.2 percent from a year ago.
Existing-home sales in the South increased 2.3 percent to an annual rate of 2.20 million in June, and are 7.3 percent above June 2014. The median price in the South was $205,000, up 7.2 percent from a year ago.
Existing-home sales in the West rose 2.5 percent to an annual rate of 1.24 million in June, and are 8.8 percent above a year ago. The median price in the West was $328,900, which is 9.9 percent above June 2014.
For more information, visit www.realtor.org.
