First-time homebuyers are getting squeezed despite existing home sales increasing +2.0% in July.
Existing Home Sales Jumped +2.0% in July
According to the National Association of REALTORS® (NAR), existing home sales increased +2.0% in July. This jump in existing home sales represented a seasonally adjusted annual rate of 599M in July 2021 compared to an annual rate of 5.90M in July 2020, a year-over-year sales increase of +1.5%.
Housing Market Adding Inventory
Good News – NAR reported indicated that the inventory of unsold homes jumped +7.3% m/m from June to July.
Bad News – Despite there being more inventory in July 2021, homebuyers are still looking at less inventory, -12% y/y or -1.5M fewer homes, than was available during July 2020.
Lawrence Yun, NAR’s chief economist, said that more inventory at all price points will lead to a more balanced market at all price points for all homebuyers. (A more balanced market translates into fewer multiple offers, fewer bidding wars, less frenetic-buying.)
Yun said, “Much of the home sales growth is still occurring in the upper-end markets, while the mid-to-lower-tier areas aren’t seeing as much growth because there are still too few starter homes available.”
Demand Still Strong
Mathew Speakman, an economist with Zillow, indicated that strong buyer demand is “…boosted, in part, by gains in inventory that are starting to offer buyers meaningfully more choice.” Speakman said that the more “…sellers (come) out of the woodwork…” the more likely “…easing of upward pressure on home prices in coming months.”
Median Home Price in July Up +17.8% y/y
The median home price jumped to $359,900 in July 2020, an increase of +17.8% y/y from $305,600 at the same time last year. The median existing single-family home price was up +18.6% y/y to $367,000 and condominiums hit a median price of $307,100 in July, an increase of +14.1% y/y.
Impact on First-Time Homebuyers’ Participation in For-Sale Market
Yun commented that this elevated cost of housing had a direct impact on both the rental market and prospective first-time buyer homeownership. Per NAR’s report, first-time homebuyers representd 30% of home sales in July, down from 31% in June and down from 34% year-over-year as prospective buyers were priced out of the for-sale market and opted to rent instead. That increased rental demand simultaneously caused rental rates to increase.
Yun also indicated that home prices are unlikely to drop over the short-term but agreed with Speakman that prices “…will level off as inventory continues to gradually improve.”
Joel Kan, vice president of economic and industry forecasting with the Mortgage Bankers Association, commented that first-time buyers are “…particularly sensitive to these elevated prices.” Additionally, according to Kan, first-time homebuyers “…are also competing with an elevated share of cash buyers – up to 23% of all buyers compared to 16% last year.”
Thanks to the National Association of REALTORS®, Zillow, Mortgage Bankers Association and HousingWire.
