Despite a recent decline in June home sales, the housing sector is currently in a better position than it has been over the last two years. According to statistics released by the National Association of Realtors (NAR), the average prices of homes in the U.S. have increased for seven consecutive months in a year-over-year comparison. More specifically, total existing-home sales dropped 1.2 percent to a seasonally adjusted annual rate of 5.08 million in June, a number that represents a 15.2 percent increase from this time last year (4.41 million). As a result, housing inventory has begun to creep up.
“Affordability conditions remain favorable in most of the country, and we’re still dealing with a large pent-up demand,” said Lawrence Yun, NAR chief economist. “However, higher mortgage interest rates will bite into high-cost regions of California, Hawaii and the New York City metro area market.”
Directly correlated to the drop in existing-home sales, is the upward trend in available housing inventory we are currently experiencing. The recent decline in home sales has increased inventory levels by 1.9 percent. The resulting increase currently represents 2.19 million homes that are for sale across the United States. For those familiar with the housing sector, 2.19 million homes equates to approximately five months of available inventory. Though inventory is trending upwards at the moment, it still remains 7.6 percent below this time last year. June 2012 provided the U.S. with a 6.4 month supply of existing-homes.
While inventory levels have favored sellers in today’s markets, the recent increase is not expected to lower prices. House hunters should expect a steady increase in the value of homes. “Inventory conditions will continue to broadly favor sellers and contribute to above-normal price growth,” Yun predicted.
Home prices in June, on a national average, were up 13.5 percent from the same time last year. The $214,200 average witnessed in June of this year marks 16 consecutive months in which year-over-year prices persisted to increase. The last time the housing sector experienced a similar increase was between February 2005 and May 2006.
A portion of the price increase may be attributed to the decline in sales of distressed properties. Typically fetching a discounted price, distressed sales dropped from 18 percent of the market in May to 15 percent of the market in June. By comparison, foreclosures sold for an average discount of 16 percent below market value in June, while short sales were approximately 13 percent below their typical asking price.
All-cash sales, the preferred method of investors, even experienced a downward turn. While they accounted for 31 percent of the transactions in June, they represented 33 percent in May.