Demand for homes grew faster than the inventory of homes for sale in July, helping push the national median price of existing homes up for the fifth month in a row despite a modest increase in sales that fell short of some analysts’ expectations.
The National Association of Realtors said today that the national median price of existing homes was up 9.4 percent from a year ago in July, to $187,300 — the strongest annual gain since January 2006. The last time the national median home price posted five consecutive months of annual gains was January to May of 2006.
Sales of existing homes — resales of single-family homes, townhomes, condominiums and co-ops — were up 2.3 percent from June to July, to a seasonally adjusted annual rate of 4.47 million. That’s a 10.4 percent increase from a year ago.
"Mortgage interest rates have been at record lows this year while rents have been rising at faster rates," said NAR Chief Economist Lawrence Yun in a statement. "Combined, these factors are helping to unleash a pent-up demand."
Yun said sales "could easily be much stronger" — in a more "normal" range of 5 million to 5.5 million per year — if not for "abnormal frictions" such as tight lending standards and shrinking inventory.
Although the number of existing homes on the market was up 1.3 percent from June to July, to 2.4 million, that represents a 6.4-month supply of homes at July’s faster pace of sales, down from 6.5 months of supply in June. And looking back a year, listing inventories were down 23.8 percent, when there was a 9.3-month supply of existing homes for sale.
Analysts generally consider a six-month supply of existing homes to be a healthy balance of supply and demand. More than that indicates that sellers significantly outnumber buyers, which puts downward pressure on prices.
"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 buyers," Yun said. "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."
Although first-time buyers accounted for 34 percent of purchases in July, up from 32 percent in June, in a normal market they account for 40 percent of purchases, NAR said.
Writing on the blog Calculated Risk, Bill McBride noted that while the annual rate of sales in July was slightly below expectations of 4.5 million, "those focusing on sales of existing homes, looking for a recovery for housing, are looking at the wrong number. For existing-home sales, the key number is inventory — and the sharp year-over-year decline in inventory is a positive for housing."
Source: National Association of Realtors via Calculated Risk blog.