Published: Aug 24, 2016 10:43 a.m. ET
Inventory is picked-over and buyers suffer from ‘a lack of excitement,’ industry group says
Homes for sale stayed on the market for an average 36 days in July, the National Association of Realtors said, down from 42 days last year.
Sales of previously owned homes fell in July as tight inventory continued to weigh on the market and prices pushed higher.
Existing-home sales declined 3.2% to a seasonally adjusted annual rate of 5.39 million, the National Association of Realtors said Wednesday. That was 1.6% lower than year ago. The July figures were lower than the 5.48 million pace forecast by economists surveyed by MarketWatch.
NAR Chief Economist Lawrence Yun attributed the decline to leaner inventory and higher prices. Inventory was 5.8% lower than a year ago, the 14th month in a row of declines from year-earlier comparables. There were 4.7 months’ worth of homes available at the current sales pace.
The median home price rose to $244,100. That’s 5.3% higher than a year ago, a faster pace of growth than wages and also much stronger than rental costs. Such strong price appreciation makes it harder for renters to become owners, Yun noted.
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It also keeps a lid on the entry of first-time buyers into the market. First-timers accounted for 32% of all transactions in July, down a tick from 33% in June but still above the 29% threshold it had been stuck at for some time.
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July’s decline followed a more-than-eight-year high in June, so some pullback was expected, Yun said. “I believe demand is not going away, it’s just lack of excitement over inventory.”
On Tuesday, the Commerce Department said that sales of new homes had surged in July to an 8-year high annual pace of 654,000.
Taken together, the two sets of data “tells an important tale of two housing markets,” wrote Trulia Chief Economist Ralph McLaughlin in a note Wednesday morning. “Homebuilders continue to thrive on healthy demand while homebuyers remain stifled by anemic inventory.” Inventory of existing stock is the lowest on record, taking population changes into account, McLaughlin added.
But Ian Shepherdson, chief economist for Pantheon Macro, thinks otherwise. “The July dip does not mark the start of a softening trend,” he wrote on Wednesday. “Indeed, the mortgage applications numbers suggest scope for sales to rise over the next few months, in contrast to new home sales, which are now overshooting the pace implied by the mortgage data.”
NAR’s Yun also noted another wrinkle that may have depressed sales in July. Many real-estate agents have complained of delays with appraisals. That may be in part due to a surge in refinancings since the U.K. Brexit referendum pushed mortgage rates lower, or it may have to do with the industry adjusting to higher home prices, Yun said. If those conditions ease, August sales figures could reflect some catch-up.