Existing home sales in the United States lost momentum in July and decreased year on year for the first time since November 2015 with a fall of 3.2%, the latest index data shows.
Total existing home sales fell to a seasonally adjusted annual rate of 5.39 million in July from 5.57 million in June and are now 1.6% below a year, only the second time in the last 21 months this has happened.
The data from the National Association of Realtors (NAR) also shows that the median existing home price for all housing types increased by 5.3% in July to $244,100, the 53rd consecutive month of year on year gains.
Lawrence Yun, NAR chief economist, said that existing sales fell off track in July after steadily climbing the last four months. ‘Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,’ he explained.
He pointed out that real estate agents are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.
‘Furthermore, with new condo construction barely budging and currently making up only a small sliver of multi-family construction, sales suffered last month as condo buyers faced even stiffer supply constraints than those looking to purchase a single family home,’ he added.
The report also shows that total housing inventory at the end of July inched 0.9% higher to 2.13 million existing homes available for sale, but is still 5.8% lower than a year ago and has now declined year on year for 14 months in a row. Unsold inventory is at a 4.7 month supply at the current sales pace, which is up from 4.5 months in June.
‘Although home sales are still expected to finish the year at their strongest pace since the downturn, thanks to a very strong spring, the housing market is undershooting its full potential because of inadequate existing inventory combined with new home construction failing to catch up with underlying demand,’ said Yun.
‘As a result, sales in all regions are now flat or below a year ago and price growth isn’t slowing to a healthier and sustainable pace,’ he added.
The share of first time buyers was 32% in July which is below last month when it was 33% but up from 28% a year ago. First time buyers represented 30% of sales in all of 2015.
All-cash sales were 21% of transactions in July, down from 22% in June, 23% a year ago and the lowest share since November 2009 when it was 19%. Individual investors, who account for many cash sales, purchased 11% of homes in July, unchanged from June and down from 13% a year ago while 70% of investors paid in cash in July.
Coming in at the lowest share since NAR began tracking in October 2008, distressed sales were 5%, down from 6% in June and 7% with 4% foreclosures and 1% short sales. Foreclosures sold for an average discount of 18% below market value in July compared to 11% in June and short sales were discounted 16% compared to 18% in June.
Properties typically stayed on the market for 36 days in July, up from 34 days in June but down from 42 days a year ago. Short sales were on the market the longest at a median of 95 days in July, while foreclosures sold in 54 days and non-distressed homes took 34 days. Some 47% of homes sold in July were on the market for less than a month.
The data also shows that single family home sales decreased 2% to a seasonally adjusted annual rate of 4.82 million in July from 4.92 million in June and are now 0.8% under the 4.86 million pace a year ago. The median existing single family home price was $246,000 in July, up 5.4% from July 2015.
Existing condominium and co-op sales dropped 12.3% to a seasonally adjusted annual rate of 570,000 units in July from 650,000 in June and are now 8.1% below July 2015. The median existing condo price was $228,400 in July, which is 4.1% above a year ago.
A regional breakdown of the figures shows that existing home sales in the Northeast fell by 13.2% and are now 5.7% below a year ago while the median price in the Northeast was $284,000, which is 3.3% above July 2015.
In the Midwest, existing home sales fell 5.2% in July which was unchanged from a year ago and the median price was $194,000, up 5% from a year ago.