Home sales and prices rose in July, but is the momentum sustainable?
July was a banner month for home prices and sales, but uncertainty looming over future changes to housing policy could blunt future momentum, according to Radian Group.
"While not contained in current data, recent changes to housing policy from the White House, Congress and the government-sponsored enterprises related to future stimulus and forbearance provisions, along with continued unknowns related to COVID-19 may begin to weigh on housing in coming months," said Steve Gaenzler, Radian's senior vice president of data and analytics.
The Radian Home Price Index increased 6.8% on an annualized rate in July from June. Between August 2019 and July, it rose by 8.1%.
The median home price nationwide was $258,206 in July, according to data from Radian's Red Bell Real Estate subsidiary.
On the supply side, the number of listings for sale was 15% below the average monthly count over the last five years, and nearly 27% below the peak monthly listing count over the same period, Radian reported. Properties were on the market for an average of 114 days, the shortest stay in over a decade.
Even though rates remained in the record-low range, the purchase share of transactions has been growing in recent months. Ellie Mae reported that purchases made up 46% of the mortgage loans closed its loan origination system processed in July, up from a low of 35% in April and May.
Remax, which tracks 53 markets, reported an 8.7% year-over-year rise in home sales during July.
"The sharp gain in home sales in July — which was the best month of home sales in our report's history — is further evidence of housing's remarkable recovery amidst the pandemic," Adam Contos, CEO at Remax Holdings, said in a press release. "Home sales typically peak in May or June, but this year we're seeing an overlap of the spring and summer markets. And, as strong as July was, sales may have been even higher if inventory hadn't been so tight."
The inventory was down to just 1.7 months of supply, which is the lowest in the 12 years that Remax has been tracking this data. That is a 30.1% drop from July 2019.
Contos is more bullish about the housing market going forward, saying, "so far, buyers have shown they are willing to pay steadily increasing prices, so the months ahead could be very active, especially if more homeowners decide to jump in and sell."
According to Remax data, July's median sales price was $285,000, up 8.6% year-over-year.
Redfin tracked a slightly different period than either Radian or Remax, and found there was a 10% year-over-year median sales price increase for the four week period ended Aug. 9.
That resulted in median home sales prices reaching an all-time high of $314,000, Redfin said. On a month-over-month basis, prices rose 3.5%; for the same period in 2019, they fell by 1.7%.
The average sale-to-list price ratio increased to a new record high of 99.1%, up from 98.4% during the same period last year. From June, it increased 0.3 percentage points. Typically during this time of year, the sale-to-list ratio declines, Redfin said, noting it fell 0.1 percentage points in 2019 and 0.2 percentage points in 2018.
"Right now you have a set of people who are highly motivated to buy — they have the money and they have the desire, and they aren't afraid of competition," Daryl Fairweather, Redfin chief economist, said in a press release. "But there is an even bigger set of homeowners who are very comfortable where they are and don't want to rock the boat. Some simply don't want to deal with the hassle of moving during a pandemic and facing competition when they buy."
Ironically, the GSEs' adverse market fee on refinancings could relieve the inventory shortage, Redfin said. It postulated that homeowners that want to take advantage of low mortgage rates would list their current property and look for a new one.
"Of course, this could also lead to more demand for homes when those sellers buy again. Therefore, new listings and home sales may climb higher after the rule goes into effect," Redfin said.