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Sales of Existing Homes Rise to Eight-Month High

JUL 22, 2014 1:33pm ET
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Sales of previously owned homes climbed in June to an eight-month high as more listings helped prices cool, luring buyers into the market..

Sales increased 2.6% to a 5.04 million annual rate last month, led by gains in all four U.S. regions, figures from the National Association of Realtors showed today in Washington. The median forecast of 78 economists surveyed by Bloomberg projected sales would rise to a 4.99 million rate. Prices advanced at the slowest pace since March 2012 and inventories rose to an almost two-year high.

Historically low interest rates and smaller price increases are helping bring homeownership within reach for more Americans. A pickup in employment opportunities that lead to faster wage growth would provide an added spark for a residential real estate market that began to soften in the middle of 2013.

"We’re recovering from the winter doldrums, more people are working and interest rates are attractive," said Brian Jones, senior U.S. economist at Societe Generale in New York, who projected a 5.05 million pace of sales for June.

Estimates in the Bloomberg survey of economists ranged from a sales pace of 4.8 million to 5.11 million after May's previously reported 4.89 million.

Compared with a year earlier, purchases of previously owned properties decreased 2.3% in June on an adjusted basis, today's report showed.

The median price of an existing home increased 4.3 percent to $223,300 in June from $214,000 a year before.

"We are getting sales increases in all price points—roughly a single-digit pace," Lawrence Yun, NAR chief economist, said at a news conference today as the figures were released. Demand has picked up "except for the very low end."

First-time buyers accounted for 28% of all purchases in June, matching the average over the past year.

"Access to affordable credit continues to hamper young, prospective first-time buyers," Steve Brown, co-owner of Irongate Inc., NAR president and a Realtor in Dayton, Ohio, said in a statement.

The number of existing properties on the market rose 6.5% to 2.3 million in June from a month earlier, the most since August 2012. At the current pace, it would take 5.5 months to sell those houses, the same as in May. The inventory of unsold homes was up from 2.6 million a year earlier.

The median time a home was on the market decreased in June to 44 days from 47 days in the prior month. Forty-two percent of homes sold in June were on the market for less than a month.

"Things are flying very fast," Yun said. Sales have seen a "nice jump in the last three months but it is underperforming in my view" compared with the fundamentals, he said.

The existing home-sales advance was led by a 6.2% gain in the Midwest, followed by a 3.2% increase in the Northeast. Purchases rose 2.7% in the West and 0.5% in the South.

Purchases of single-family homes increased 2.5% to an annual rate of 4.43 million, the report showed. The sales pace of multifamily properties including condominiums climbed 3.4 percent to 610,000 in June, also the highest since October.

Cash transactions accounted for about 32% of all purchases in June, according to the report. Investors made up 16% of purchases.

Sales of distressed property, including foreclosures, accounted for 11% of the total last month, matching the lowest share since October 2008.

Existing-home sales, which are tabulated when a purchase contract closes, are recovering from a 13-year low of 4.11 million in 2008 after reaching a record 7.08 million in 2005. They climbed to 5.09 million for all of 2013.

The housing market continues to face hurdles to its recovery—from shortages in construction and labor to mortgage rates that remain elevated compared with early 2013.

The pace of home construction slumped 9.3% to an 893,000 annualized rate from a 985,000 pace in May that was weaker than initially estimated, figures from the Commerce Department showed.

The average rate for a 30-year fixed mortgage was 4.13% in the week ended July 17, according to Freddie Mac. While down from 4.53% at the start of the year, it's higher than the 3.35% in May 2013.

At the same time, homebuilders are optimistic the market. A report last week showed confidence among homebuilders rose in July to the highest level in six months. The National Association of Home Builders/Wells Fargo sentiment measure climbed to 53 from 49 in June, the Washington-based group reported. Readings above 50 mean more respondents said conditions were "good."

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