Strengthening Job Market, Rising Inventories Lift Home Sales

August 22, 2014

Existing-home sales were on the rise in July, with sales moving to the highest pace of this year, the National Association of REALTORS® reports in its latest housing data release. It also marked the fourth consecutive month of gains in sales. NAR’s chief economist expects the growing momentum in home sales to continue for the rest of the year.

“The number of houses for sale is higher than a year ago and tamer price increases are giving perspective buyers less hesitation about entering the market,” says Lawrence Yun, NAR’s chief economist. “More people are buying homes compared to earlier in the year, and this trend should continue with interest rates remaining low and apartment rents on the rise.”

Total existing-home sales – which reflect completed transactions for single-family homes, townhomes, condominiums, and co-ops – rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million in July. However, sales remain 4.3 percent below last July, the peak for 2013.

Housing inventories at the end of July rose by 3.5 percent to 2.37 million existing homes for-sale – which represents a 5.5 month supply at the current sale pace, NAR reports.

Fading Affordability

Yun cautions that housing affordability is likely to decline in the upcoming years. “Although interest rates have fallen in recent months, median family incomes are still lagging behind price gains, and mortgage rates will inevitably rise with the upcoming changes in monetary policy,” Yun notes.

The median existing home price for all housing types in July was $229,900 – 4.9 percent higher than July 2013. It marks the 29th consecutive month of year-over-year price gains, NAR reports.

Distressed Sales Hit Important Milestone

Distressed homes – which include foreclosures and short sales – made up 9 percent of July sales, down from 15 percent a year ago. It was the first time that distressed sales fell to single-digits since NAR began tracking the category in October 2008 – an important milestone, NAR notes.

In July, 6 percent of sales were foreclosures (selling for an average discount of 20 percent below market value) and 3 percent were short sales (discounted, on average, 14 percent), NAR reports.  

“To put it in perspective, distressed sales represented an average of 36 percent of sales during all of 2009,” Yun says. “Fast-forward to today and rising home values are helping owners recover equity and strong job creation are assisting those who may have fallen behind on their mortgage due to unemployment or underemployment.” 

Regional Snapshot

Across the country, here’s a look at how existing-home sales performed in July:

  • Midwest: Existing-home sales rose 1.7 percent in July to an annual 1.22 million level, but remain 4.7 percent lower than July 2013 numbers; median price: $175,200, up 4.1 percent from a year ago.
  • Northeast: Existing-home sales held flat in July at an annual rate of 640,000 for the second consecutive month, remaining 9.9 percent below year ago levels; median price: $273,600, a 2.4 percent increase year-over-year
  • South: Existing-home sales increased 3.4 percent to an annual rate of 2.12 million, and are up slightly by 0.5 percent year-over-year; median price: $192,000, up 5.0 percent from a year ago.
  • West: Existing-home sales rose 2.6 percent to an annual rate of 1.17 million, but are 8.6 percent below year ago levels; median price: $304,100 -- 6.3 percent higher year-over-year.

Source: National Association of REALTORS®