July sales of existing homes across the country rose to their highest annual pace of the year – with the South leading the way – while the ongoing decline in distressed sales reached an important milestone.
But a National Association of Realtors monthly report released Thursday also noted that last month’s sales were behind compared with the same month in 2013. The South was the only region to show an increase in year-over-year sales, and it was a small one.
And, adding a cautionary note, Lawrence Yun, NAR chief economist, said that housing could soon become less affordable for many buyers, which could slow any momentum.
Total existing-home sales in July – closings of single-family homes, town homes, condominiums and co-ops – rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million from a slight downwardly-revised 5.03 million in June.
Sales have risen for four consecutive months, but remain 4.3 percent below the 5.38 million unit level from last July, which was the peak of 2013.
Lawrence Yun, NAR chief economist, says sales momentum is slowly building behind stronger job growth and improving inventory conditions.
“The number of houses for sale is higher than a year ago and tamer price increases are giving prospective buyers less hesitation about entering the market,” Yun said.
But, he warned, housing is likely to become less affordable in next few years.
“Although interest rates have fallen in recent months, median family incomes are still lagging behind price gains, and mortgage rates will inevitably rise with the upcoming changes in monetary policy,” he said.
The median existing-home price in July – the 29th consecutive month of year-over-year price gains – was $222,900, which is 4.9 percent more than July 2013.
Housing inventory at the end of July rose 3.5 percent to 2.37 million, a 5.5-month supply at the current sales pace. Equilibrium is six months. Inventory is 5.8 percent higher than a year ago, when there were 2.24 million existing homes for sale.
Distressed homes accounted for 9 percent of July sales, down from 15 percent a year ago.
That’s the first time short sales and sales of homes in foreclosure were in the single-digits since NAR started tracking them separately in October 2008.
Six percent of July sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 20 percent below market value in July, while short sales were discounted 14 percent.
Yun says the deepest housing wounds suffered during the Great Recession are beginning to fully heal.
“To put it in perspective, distressed sales represented an average of 36 percent of sales during all of 2009,” he said. “Fast-forward to today and rising home values are helping owners recover equity and strong job creation are assisting those who may have fallen behind on their mortgage due to unemployment or underemployment.”
All-cash sales in July were 29 percent of transactions, down from 32 percent in June, and representing the lowest overall share since January 2013 (28 percent). Individual investors, who account for many cash sales, purchased 16 percent of homes in July, unchanged from last month and July 2013. Sixty-nine percent of investors paid cash in July.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage fell for the third consecutive month to 4.13 percent in July from 4.16 percent in June, and remains the lowest rate since June 2013 (4.07 percent).
The share of first-time buyers in July rose slightly for the second straight month to 29 percent (28 percent in June), but remain historically low.
The median time on market for all homes was 48 days in July, up from 44 days in June; it was 42 days on market in July 2013. Short sales were on the market for a median of 93 days in July, while foreclosures sold in 58 days and non-distressed homes typically took 45 days. Forty percent of homes sold in July were on the market for less than a month.
Single-family home sales increased 2.7 percent to a seasonally adjusted annual rate of 4.55 million in July from 4.43 million in June, but remain 4.2 percent below the 4.75 million pace a year ago. The median existing single-family home price was $223,900 in July, up 5.1 percent from July 2013.
Existing condominium and co-op sales remained unchanged in July from June at an annual rate of 600,000 units, and are 4.8 percent below the 630,000 unit pace a year ago. The median existing condo price was $215,000 in July, which is 3.3 percent higher than a year ago.
In the report’s regional breakout of July’s annualized data, the South’s annual sales rate increased by 3.4 percent, to 2.12 million units, besting the Northeast, Midwest and West.
And the South was the only region to show an increase in sales compared to July 2013, albeit by only 0.5 percent.
That’s in contrast to the Northeast’s flat annual rate, staying at 600,000 units (9.9 percent down from July 2013); a 1.7 percent increase in the annual sales rate in the Midwest, to 1.22 million units (4.7 off a year previously); and the West’s 2.6 percent annual sales rate climb to 1.17 million units (an 8.6 percent drop from July 2013).
In terms of median prices, the South had the second-highest year-over-year percentage increase, of 5 percent, to $192,000.
That contrasts with a 6.3 percent jump in the West, to $304,100; 4.1 percent in the Midwest, to 175,200; and 2.4 percent in the Northeast, to $273,600.
The NAR data are derived solely from closings of homes on local and regional multiple listing services. They differ from those used by the U.S. Census Bureau, which are based contracts or deposits. The NAR’s monthly annual sales rate represents what the total number of sales for a year would be if the relative pace for a given month were maintained for 12 months.