In a recent article for Reuters, Lucia Mutikani reported that home sales dropped to a more than expected -1.7% or 5.27M homes in June 2019, according to the National Association of REALTORS ® (NAR). Simultaneously, also according to NAR, the median price of a single-family home increased +4.3% from one year ago to an all-time high of $285,700.
NAR indicated a -19% drop in sales of houses priced at $100,000 or below when compared to last year’s sales figures. Also faltering were sales of houses priced at $1M+ due, according to NAR, last year’s revamp of the tax code that cut homeowners’ deductions.
Mathew Speakman, an economist with Zillow, said, “Meager inventory levels, especially in the entry-level segment, and still rising prices continue to limit the selection of homes available for budget-conscious buyers.”
Among this doom and gloom sales volume scenario, existing home sales rose in the Northeast and Midwest regions of the country while sales tumbled in the South and West.
Reuters is now suggesting that the drop in sales volume might have become a drag on the economy’s GDP in Q2 2019. “Real estate agents are earning fewer commissions and, as a result, their consumer spending is down.” Additionally, spending on homebuilding contracted in Q1 2019 for the fifth consecutive quarterly decline.
The Federal Housing Finance Agency (FHFA) saw its Home Price Index rise to a seasonally adjusted 5.0% in May 2019 from one year ago and slowing from the increase of 5.2% in April 2019.
Who to trust concerning these prognostications? According to Daniel Silver, an economist with JPMorgan, “We believe that the FHFA Index is the more reliable indicator because the price it measures in its existing home sales report does not control for changes in the mix of sales (as does NAR’s Index.) The FHFA Index continues to show that the pace of appreciation has been cooling lately, which is consistent with several other related measures.”
DOM in June 2019 totaled 27 while 56% of the homes on the market sold in less than one month. Reuters reported that, at the June 2019 sales pace, it would take 4.4 months to exhaust current supply.
Reuters also reported that 35% of home sales were generated by first-time buyers, up from 32% in May 2019 and up from 31% one year ago. However, economists and realtors agree that a share of 40% of first-time buyers is needed for a robust housing market.