So far this year, July registered peak sales for existing homes, according to the National Association of Realtors® (NAR). Sales increased 2.4% from June to a seasonally-adjusted yearly rate of 5.15 million units. The rate of sales reported for July represents the fourth consecutive monthly increase, this year; yet, the rate is still 4.3% lower than the same period a year before. July 2013 was the month with the highest sales rate last year.
The improving inventory conditions and the consistent job growth explain the slight increase in sales as shown by Lawrence Yun, NAR chief economist. There are a higher number of houses for sale, and the slow increase in prices encourages prospective buyers to make a purchase. Given the rise in apartment rents and the low interest rates, more people now prefer buying to renting. This trend is expected to continue.
A decline in affordability is expected for the coming years. Despite the drop in interest rates in recent months, price gains are still going ahead of the lagging median family incomes. Moreover, with the upcoming changes in the monetary policy, there will be an inevitable increase in mortgage rates too.
In July, a 2.7% increase has been reported for single-family home sales to a seasonally adjusted annual rate of 4.55 million from June’s 4.43 million. Yet, compared to July’s 2013 pace of 4.75 million, sales were 4.2% lower this year. No changes have been signaled in existing condominium and co-op sales from June. The annual rate remained 600,000 units, 4.8% less than the rate in July 2013.
For existing homes of all types, the median price had a 4.9% increase on an annual basis to $222,900. This is a year-over-year increase that continues for the 29th consecutive month. The median price for single-family homes was $223,900, 5.1% higher than 2013, and the median price for a condo had a 3.3% annual increase to $215,000.
July also brought a record low in the share of distressed homes – short sales and foreclosures. For the first time since October 2008 when NAR started to track this category, the rate fell below double digits. Only 9% of sales were distressed, 6% lower than the 15% distress rate in July 2013. This drop continues the decreasing trend previously reported for June (from 15.8% in 2013 to 11% this year).
According to NAR, from the total amount of distressed properties 3% were short sales and 6% foreclosed homes. In the case of short sales, properties had a 14% discount compared to the market value, whereas foreclosures had a 20% discount.
Analysts report that the recovery process from the Great Recession is coming to an end. While throughout all 2009, distressed sales represented 36% of sales, the situation has significantly improved since then. Home owners can now recover equity thanks to rising home values, not to mention that the strong job growth helps those who have fallen behind their mortgage because of employment problems.
A significant drop has been registered in all-cash sales from 32% of all transactions in June to 29% in July. This is the lowest overall share since the 28% of January 2013. In July, only 16% of homes were purchased by individual investors who usually account for a large share of cash transactions.
There was a slight increase in the percent share of first-time buyers, from 28% in June to 29% in July. Nevertheless, the share of sales to first-time buyers remains a historic low despite the second consecutive monthly increase.
Access to home ownership is expected to improve thanks to the new credit scoring calculation announced by FICO (Fair Issac Corp.) recently. Broader access to credit for homebuyers who have been disadvantaged by flawed credit score represents a market objective that the National Association of Realtors fully supports. Qualified homebuyers should be given the possibility to re-enter the housing market.
There were 2.37 million of existing homes available on the market at the end of July, which is a significant 3.5% increase from the inventory at the end of June. At the current sales pace, this represents a 5.5-month supply. The inventory for unsold properties is 5.8% higher than in 2013, when 2.24 million existing homes were available for sale.
In July, the number of existing-home sales did not change in the Northeast compared to June: the annual rate remained 640,000, 9.9% less than in 2013. For the northeastern region, the median price had a 2.4% increase to $273,600, from July 2013.
For the Midwest, the sales of existing homes increased 1.7%, reaching a 1.22 million annual level in July; yet, this is still 4.7% less than July 2013. There was a 4.1% annual increase in the median price for the Midwestern region to $175,200.
Sales increased 3.4% in the South reaching a 2.12 million annual rate. This is a slight increase (0.5%) from July 2013. The median annual price is 5.0% higher from a year ago, reaching $192,000.
In the West, sales had a 2.6% increase to 1.17 million in July, but the level is 8.6% lower than July 2013. There was a 6.3% median price increase for the western region to $304,100, compared to the previous year.
The median time on the market calculated for all residential properties was 44 days in June, 48 days in July and 42 days in July 2013. Foreclosures sold in 58 days on the average, short-sales in 93 days, whereas non-distressed properties took around 45 days on the average. 40% of the homes sold in July had been for less than a month on the market.