Lower Mortgage Rates Drive Sales Turnaround
August 21, 2019
Existing-home sales showed improvement in July, a welcome sign for what has been a mostly sluggish summer real estate market. Reversing course last month, sales climbed 2.5% over June, the National Association of REALTORS® reported Wednesday. The Northeast was the only major region of the U.S. to see sales decline in July. The bulk of sales growth was attributed to the West.
“Falling mortgage rates are improving housing affordability and nudging buyers into the market,” says Lawrence Yun, NAR’s chief economist. But a shortage of supply in the lower price brackets continues to limit sales growth, he adds. “The shortage of lower-priced homes have markedly pushed up home prices.”
Home price appreciation has been stronger in the lower price brackets compared with the upper price ranges. Comparing the same homes that were sold in 2018 and in 2012 in 13 large metro areas, the lower half of the market jumped by more than 100% in 2018 in metro areas such as Atlanta-Sandy-Springs-Roswell, Ga. (165%); Denver-Aurora-Lakewood, Colo. (103%); Miami-Fort-Lauderdale, Fla. (119%); and Tampa-St. Petersburg-Clearwater, Fla. (125%). On the other hand, the median home price for homes purchased in the upper half of the market in these same metro areas in 2012 increased at a much slower pace, according to an analysis of proprietary deed records data from Black Knight Inc. and Realtors Property Resource®.
“Clearly, the inventory of moderately priced homes is inadequate and more home building is needed,” Yun says. “Some new apartments could be converted into condominiums thereby helping with the supply, especially in light of new federal rules permitting a wider use of Federal Housing Administration mortgages to buy condo properties.”
A closer look at key indicators from NAR’s July housing report:
- Home prices: The median existing-home price for all housing types in July was $280,800, up 4.3% from a year ago ($269,300).
- Housing inventories: Total housing inventory at the end of July decreased to 1.89 million, a 1.6% drop from 1.92 million one year ago. Unsold inventory is at a 4.2-month supply at the current sales pace.
- Days on the market: Fifty-one percent of homes sold in July were on the market for less than a month. On average, properties stayed on the market for 29 days in July, up from 27 days a year ago.
- All-cash transactions: All-cash sales accounted for 19% of transactions in July, down from 20% a year ago. Individual investors and second-home buyers make up the bulk of cash sales. They purchased 11% of homes in July, down from 12% a year ago.
- Distressed sales: Foreclosures and short sales continue to shrink, comprising 2% of sales in July and down from 3% a year ago. Less than 1% of sales from a year ago were short sales.
Here’s a closer look at how existing-home sales fared in July across the country:
- Northeast: Existing-home sales dropped 2.9% to an annual rate rate of 660,000, a 4.3% decline from a year ago. Median price: $305,800, down 1.0% from a year ago.
- Midwest: Existing-home sales rose 1.6% to an annual rate of 1.27 million, which is a 0.8% increase from July 2018. Median price: $226,300, an 8.1% increase from a year ago.
- South: Existing-home sales rose 1.8% to an annual rate of 2.31 million in July, up 2.7% from a year ago. Median price: $245,100, up 5.2% from one year ago.
- West: Existing-home sales increased 8.3% to an annual rate of 1.18 million in July, about 0.8% below a year ago. Median price: $408,000, up 3.7% from one year ago.
Updated: September 20, 2019