Existing home sales represent approximately 90% of all US home sales. When the needle moves in one direction or the other on the number of homes sold or the sales prices for those homes, it matters. It matters a lot.
According to the National Association of REALTORS®(NAR), existing home sales dropped -0.7% in July to a seasonally adjusted annual rate of 5.34M housing units. This is the 4th consecutive month of falling existing home sales…the longest stretch of monthly declines since 2013.
The only good news here is that finally, for the first month in three years, inventory did not also fall on a year/year basis. There were 1.92M homes on the market in July 2018, the same number as last year art this time.
At July’s sales pace, how long would it take to run through the current inventory of homes available for sale? Approximately 4.3 months. A “healthy,” market, on the other hand, is a market in which there is an inventory supply of 6-7 months and a balance between supply and demand.
Exacerbating these inventory shortages is the fact that new construction is not closing the supply gap. Recurring and rising costs of building materials, land and labor are the stumbling blocks.
The consequence of inadequate inventory supplies, both existing and newly constructed single-family homes and condominiums, is that housing prices continue to rise. The median price of a single-family home, now $269,600 nationally, increased by +4.5% in July as compared to last year at this time.
It’s obvious…the higher prices rise, the fewer people there are who are able to afford buying a house. Higher home prices = less affordability in the houses available to buy = lower demand for available houses = lower number of houses sold.
Also, remind yourself to consider, along with rising prices and inadequate supplies, the impact of rising mortgage interest rates on home sales.
-5.72M home sales at prime interest rate of 4.25% in November 2017
– 5.38M home sales at prime interest rate of 4.5% in January 2018
– 5.6M home sales at prime interest rate of 4.58% in March 2018
– 5.34M home sales at prime interest rate of 5% in July 2018