The month of June was red hot for the U.S. housing market as sales of existing-homes ascended for the fourth straight month, reaching a nine-year high, the National Association of Realtors (NAR) said Thursday.
Comprised of single-family homes, townhomes, condominiums and co-ops, transactions for existing-homes sales increased 1.1 percent during June to a seasonally adjusted annual rate of 5.57 million, up from 5.51 million in May. Sales are now three percent higher than the same period of 2015 and their highest pace since February 2007 despite sales from investors falling to their lowest since July 2009.
“Existing sales rose again last month as more traditional buyers and fewer investors were able to close on a home despite many competitive areas with unrelenting supply and demand imbalances,” said NAR Chief Economist, Lawrence Yun. “Sustained job growth as well as this year’s descent in mortgage rates is undoubtedly driving the appetite for home purchase.’
Existing-home sales were buoyed by first-time homebuyers in the month of June, making up 33 percent of sales — it’s highest total since July 2012. In the first six months of 2016, first-time homebuyers have represented on average 31 percent of existing-home sales, while a mere 11 percent of sales were investors, the lowest since 2009.
“The modest bump in June sales to first-time buyers can be attributed to mortgage rates near all-time lows and perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way onto the markets,” said Yun. “The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply — particularly areas in the Midwest and part of the South.”
The median existing-home price in June for all housing types was $247,700, a 4.8 percent increase from a year ago. The increase marks the 52nd consecutive month median home prices for existing-homes have increased.
While home prices get fatter, housing inventory continues to get thinner. Inventory levels at the end of June were 5.8 percent lower from a year ago, falling 0.9 percent to 2.12 million existing homes for sale. As things sit right now with the current pace of sales, it would take 4.6 months to consume the supply of homes on the market.
According to the NAR, 48 percent of homes were on the market for less than a month with the typical home selling within 34 days in June, an increase of two days from May. Short sales stayed on the market for the longest with a median of 156 days in June, while foreclosures sold within 49 days and non-distressed homes took 30 days.
“Buyers have held up their end of the market, spurred by very low mortgage rates. But the lack of new listings continues to crimp overall activity, meaning that there’d be more sales if there were more people selling,” said Nela Richardson, chief economist for residential valuation site Redfin.
The NAR’s Yun cautioned the market’s ability to sustain its current pace. “Looking ahead, it’s unclear if this current sales pace can further accelerate as record high stock prices, near-record low mortgage rates and solid job gains face off again a dearth of homes available for sale and lofty home prices that keep advancing,” said Yun.
With demand outpacing supply, homebuyers responded in June by making aggressive offers that saw the average sale-to-list price percentage reach 95.5 percent, up 0.6 percent from the previous year. To top it off, 23.6 percent of homes sold above the list price, up 22.2 percent from the previous year.
Although a lack of supply continues to propel home prices, a surge in new-home construction is expected to address supply shortages. June saw housing starts rise 4.8 percent to a seasonally adjusted annual rate of 1.189 million, while an estimated 1.015 home were under construction in June, the highest level since February 2008. Moving forward, new applications for building permits — an indicator of upcoming construction — increased 1.5 percent to 1.153 million in June, which should prove to be beneficial for homebuyers in coming months.
First-time homebuyers are expected to continue encompassing a larger part of the home purchase demographic moving forward. Although home prices are anticipated to continue rising, near record-low mortgage rates will continue helping draw more first-time homebuyers in. As of Thursday, the rate for a 30-year, fixed-rate mortgage was 3.45 percent, according to Freddie Mac, down from 4.04 percent a year ago.