Sales of previously owned homes rebound on lower rates
Sales of previously owned homes rose in June for the first time in four months as the economy reopened more broadly from coronavirus-related shutdowns and buyers took advantage of record-low mortgage rates.
Closing transactions jumped 20.7% from the prior month to an annualized pace of 4.72 million, data from the National Association of Realtors showed Wednesday. The median forecast in a Bloomberg survey of economists called for a 4.75 million rate. Compared with a year ago, however, purchases were down 3.4% on an unadjusted basis.
"The housing market is hot. Red hot," Lawrence Yun, NAR's chief economist, said on a call with reporters. Homebuyers are favoring smaller towns and suburbs, perhaps because people are looking for a larger-sized home to accommodate working from home, Yun said.
The figures show a rebound in the housing market that is providing a source of support for the economy. At the same time, the pace of sales may be difficult to sustain at near pre-pandemic levels given millions of job losses and more-recent rollbacks of reopening plans in states experiencing a pickup in coronavirus cases.
"Overall, the housing market is one of the segments of the economy that is in a V-shaped type recovery," Ryan Sweet, head of monetary policy research at Moody's Analytics Inc., said. There are "a couple reasons behind that. Mortgage rates are near record lows, and the recession is impacting lower-income households, renters, much more than high-income households."
Purchases of previously owned single-family homes jumped 19.9%, while sales of condominiums rose 29.4%, the NAR said. Condos are currently about 9% of all sales, down from a typical 12% share. Yun said that the smaller share of condominiums could reflect people desiring a single-family property because of the virus or that the home has become not only place to live but an office.
Properties in June typically remained on the market for 24 days, down from 27 days in the same month last year. Also, 62% of the homes sold in June were on the market for less than a month.
The group's report showed the median home price increased 3.5% from a year earlier to a record $295,300. Inventory fell 18.2% from a year ago to 1.57 million, marking the 13th straight monthly decline on a year-over-year basis. The number of homes for sale would last four months at the current sales pace. Anything below five months is seen as a tight market.
If the number of listings last month was similar to that of June 2019, "we would have easily sold those inventory. So, home sales are being constrained due to the lack of inventory," Yun said. "We are facing an acute inventory shortage, especially at the lower price points."
Existing-home sales increased in all four U.S. regions in June, led by a 31.9% jump in the West and a 26% rise in the South. Purchases also rose 11.1% in the Midwest and 4.3% in the Northeast.
Previously owned home sales account for about 90% of U.S. transactions and are calculated when a contract closes. New-home sales, which make up the remainder, are based on contract signings and June data will be released Friday.