Existing Home Sales Drop for First Time Since February
Sales of previously owned homes dropped more than forecast in July from a nine-year high, restrained by limited choices for buyers, National Association of Realtors data showed Aug. 24.
Key Points
• Contract closings declined 3.2% to a 5.39 million annual rate (forecast was 5.51 million).
• Sales declined 6.7% from July 2015 before seasonal adjustment.
• Median price of an existing home rose 5.3% from July 2015 to $244,100.
• Inventory of available properties decreased 5.8% from a year earlier to 2.13 million units.
Big Picture
July marked the first decline since February for the repeat sales market as inventories on a year-over-year basis fell for a 14th straight month. The pace is nonetheless consistent with forecasts for another solid year for sales of previously owned properties, at the same time new-home purchase data on Aug. 23 indicated economic growth will be further aided by more residential investment.
Demand has been fueled by borrowing costs near record lows and a labor market approaching full employment. Faster wage growth along with more listings and construction of entry-level properties have the potential of boosting the housing market even more.
Economist Takeaways
“I believe that demand is not going away — it’s just lack of excitement because of a lack of inventory,” Lawrence Yun, chief economist at the Realtors group in Washington, told reporters as the data were released. “Because of the tight inventory, home prices continue to move higher. That makes it difficult for renters to convert to home ownership. First-time buyers really need to come into the market.”
The Details
• Sales declined in three of four regions, including a 5.2% drop in the Midwest and a 1.8% decrease in the South.
• At the current pace, it would take 4.7 months to sell out housing inventory, compared with 4.5 months in June; less than a five months’ supply is a tight market, the Realtors group has said.
• Properties were on the market for 36 days in July, compared with 42 one year ago.
• Single-family home sales decreased 2% to an annual rate of 4.82 million while purchases of condominium and co-op units dropped 12.3% to a 570,000 pace.
• First-time buyers accounted for 32% of all sales, easing from 33% in June.
• Sales of properties priced less than $100,000 declined 16.6% from a year earlier, while purchases of dwellings in the $100,000 to $250,000 range dropped 8.2%.
