Home sales activity bounced back in June after a four-month decline as home prices continue to hit new highs.
Existing home sales rose 1.4% to a seasonally adjusted 5.86 million in June, from a month earlier, according to the National Association of Realtors (NAR). The results missed analyst expectations of a 1.7% gain and 5.9 million units, according to Bloomberg consensus, but remain above activity seen before the COVID-19 pandemic when typically 5.5 million units are sold in a month. Existing home sales are up 22.9% from a year ago, when some states were still in lockdown. Sales activity was up in three of the four regions of the U.S.; in the South the number of sales was unchanged.
"The housing market remains strong," said Lawrence Yun, NAR chief economist. "Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales."
The median existing-home price for all housing types in June hit $363,300, the highest level recorded since January 1999. The results follow the S&P CoreLogic Case-Shiller national home price index posted the fastest price growth in more than 30 years. That index trails other home price data reports.
“At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year,” Yun said. “Ideally, the costs for a home would rise roughly in line with income growth, which is likely to happen in 2022 as more listings and new construction become available.”
He noted that the increase in home prices was partially driven by an increase in sales of higher end properties, homes above $500,000. The sale of homes priced $500,000 to $750,000 was up 81% from a year ago, while sales of homes from $750,000 to $1 million was up 119%, the NAR said.
"Affordability challenges persist for many potential buyers," said Joel Kan, Mortgage Banker Association’s assistant vice president of economic and industry forecasting, in a press statement. "Our data on mortgage applications show that purchase activity has moved lower since March, while the average loan size has stayed elevated, consistent with the elevated share of all-cash sales and higher median prices reported by NAR.”
Total housing inventory at the end of June amounted to 1.25 million units, up 3.3% from May’s inventory and down 18.8% from one year ago. Homes are being sold at a record clip of 17 days on the market. Five years ago during normal market conditions (post Great Recession and pre-COVID) homes were on the market for 30 days. Unsold inventory sits at a 2.6-month supply at the current sales pace, modestly up from May’s 2.5-month supply but down from 3.9 months in June 2020.
"Maybe by the end of the year and in 2022 we will begin to see inventory growth," Yun said, referring to recent housing start data and the winding down of mortgage forbearance which could result in more homes being put up for sale.
The modest rebound in sales activity was expected as pending home sales, which is a leading indicator of future sales, also turned around in May, increasing 8% from the previous month. Pending home sales grew robustly last month, while permits, which usually lead starts, have declined in recent months, Credit Suisse recently wrote in a research note prior to the results.
"As we approach the late summer, the months ahead hold critical clues into the housing market’s post-pandemic future. If sales maintain recent momentum, even as inventory rises, it should help bolster builder confidence and convince them that high demand for housing is not a short-term phenomenon," said Realtor.com Chief Economist Danielle Hale in a statement. "This should also ultimately lead to more construction and put a bigger dent in the ongoing shortage of homes for sale. But if home sales slip, perhaps due to households prioritizing other spending categories that were neglected during the pandemic, builders may proceed more cautiously.”
Amanda Fung is an editor at Yahoo Finance.