For the third consecutive month, existing home sales (completed transactions) improved, according to the National Association of Realtors (NAR). In July, the index rose 2.0 percent from June, and increased 10.3 percent from July 2014, remaining at the highest pace since February 2007. It has now increased year-over-year for ten consecutive months.
The NAR reports that first-time buyers fell to their lowest share since January, pointing their finger at “stubbornly low inventory levels and rising prices,” yet another likely reason the trade group is in support of loosening lending conditions.
Why these gains could soon slow
Dr. Lawrence Yun, NAR chief economist, says the increase in sales in July solidifies what has been an impressive growth in activity during this year’s peak buying season. “The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now,” he said. “As a result, current homeowners are using their increasing housing equity towards the downpayment on their next purchase.”
As the median existing-home price hit $234,000 (up 5.6 percent from last July), Dr. Yun warns, “Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand. RealtorsÒ in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains.”
Days on market rose this month
Inventory dropped another 0.4 percent in July to 2.24 million existing homes available for sale, which is 4.7 percent below July 2014. The average days on market is 42 in July, down six days from July 2014, but a significant jump from June’s 34 day average.
The report notes, “Representing the lowest share since NAR began tracking in October 2008, distressed sales – foreclosures and short sales – declined to 7 percent in July from 8 percent in June; they were 9 percent a year ago. Five percent of July sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in July (15 percent in June), while short sales were discounted 12 percent (18 percent in June).”
Regional performance varied
The index revealed that the most improved region for the month was the South, rising 4.1 percent, up 9.6 above July 2014. Sales rose 3.2 percent in the West for the month (11.3 percent above July 2014), remained unchanged for the month in the Midwest (but up 10.9 percent for the year), and actually fell in the Northeast by 2.8 percent compared to July (which is still 9.4 percent higher than July 2014).
The median price was highest in the West at $327,400 (up 8.4 percent above July 2014), followed by the Northeast at $277,200 (up 1.3 percent annually), the South at $203,500 (7.0 percent higher than July 2014), and finally, the Midwest at $186,500 (up 6.6 percent from a year ago).
We’ve come a long way, says NAR President
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says the housing market is in a much better place and has come a long way since the depths of the recession.
“Five years ago, distressed sales represented 33 percent of the market in July,” he said. “For many previously distressed homeowners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments.”