The continued shortage of available properties continues to drive prices in many markets to record high levels, creating myriad challenges for real estate agents in today’s market. The issues are starting to have an impact on existing home sales, as volumes dropped in June.
A CNBC report noted that existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 1.8 percent to a seasonally adjusted annual rate of 5.52 million in June from 5.62 million in May. Despite last month’s decline, June’s sales pace is 0.7 percent above a year ago, but is the second lowest of 2017 (February, 5.47 million).
A tight housing supply continues to impact monthly sales, leading to bidding wars, which have culminated in house price increases outpacing wage gains. Lawrence Yun, NAR chief economist, says the previous three-month lull in contract activity translated to a pullback in existing sales in June.
“Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget. The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”
Housing inventory has dropped for 25 straight months on a year-on-year basis. This is driving increases in prices, with the median house price jumped 6.5 percent from a year ago to an all-time high of $263,800 in June. It was the 64th straight month of year-on-year price increases. Total housing inventory at the end of June declined 0.5 percent to 1.96 million existing homes available for sale, and is now 7.1 percent lower than a year ago (2.11 million) and has fallen year-over-year for 25 consecutive months.
Yun noted that first-time homebuyers comprised 32 percent of existing-home sales in June, a decrease from 33 percent in May and one year prior.
“It’s shaping up to be another year of below-average sales to first-time buyers despite a healthy economy that continues to create jobs. Worsening supply and affordability conditions in many markets have unfortunately put a temporary hold on many aspiring buyers’ dreams of owning a home this year.”
Another ongoing trend is homebuilders’ struggle to find labor and land to help plug the inventory gap. Housing starts in June rebounded 8.3 percent to a 1.22 million-unit pace, however they remain below the historic average of 1.5 million units. Unsold inventory is at a 4.3-month supply at the current sales pace, which is down from 4.6 months a year ago. A six-month supply is the benchmark for a healthy balance between supply and demand.