Low housing supply weighs on June sales of existing homes

Low housing supply weighs on June sales of existing homes
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Low housing supply dampened sales of previously owned homes in June even as homes are selling at a near record pace.

Existing-home sales, which are completed transactions that include single-family homes and townhomes, slipped 1.8 percent last month to a seasonally adjusted annual rate of 5.52 million from 5.62 million in May, the National Association of Realtors reported on Monday.

Despite last month’s decline, June’s sales pace is 0.7 percent ahead of a year ago, but is the second lowest of 2017, behind February’s 5.47 million.

Only the Midwest saw a sales increase last month.

The lack of housing inventory is the main problem contributing to the market's sluggish results. 

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Supply at the end of June declined 0.5 percent to 1.96 million existing homes available for sale and is now 7.1 percent lower than a year ago. Inventory has fallen year-over-year for 25 consecutive months.

Unsold inventory is at a 4.3-month supply at the current sales pace, which is down from 4.6 months a year ago.

"Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget," said Lawrence Yun, the NAR chief economist.

The lull in contract signings during the previous three months signaled the potential slow down in sales this summer.

"Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines," Yun said. 

Low inventory pushed up the median price in June to $263,800, up 6.5 percent from June 2016.

Despite falling mortgage rates, higher prices may make it more difficult for first-time buyers to jump into the market.

In June, those buyers represented 32 percent of sales, which is down from 33 percent in May and a year ago.

“It’s shaping up to be another year of below average sales to first-time buyers despite a healthy economy that continues to create jobs,” Yun said.

“Worsening supply and affordability conditions in many markets have unfortunately put a temporary hold on many aspiring buyers’ dreams of owning a home this year," he said. 

The average interest rate for a 30-year, fixed-rate mortgage declined for the third consecutive month, dipping to 3.9 percent in June from 4.01 percent in May, according to Freddie Mac.

The average rate for all of 2016 was 3.65 percent.

The sale of single-family homes dipped 2 percent to a seasonally adjusted annual rate of 4.88 million in June from 4.98 million in May.

While the market continues to battle some headwinds, distressed sales — foreclosures and short sales — were 4 percent of sales in June, down from 5 percent in May, which matches September 2016 as the lowest share since NAR began tracking in October 2008, after the start of the financial crisis. 

Regionally, existing-home sales in the Northeast fell 2.6 percent, sales in the South decreased 4.7 percent and sales in the West declined 0.8 percent.

In the Midwest, existing-home sales rose 3.1 percent.