'Drastic Imbalances' Push Existing Home Prices to Record High

There was unabashedly good news from the NationalrnAssociation of Realtors®rn(NAR) this morning.  Not only werernexisting home sales in June at the fastest pace in over eight years but thernmedian price of an existing home exceeded the price peak established before thernhousing crisis.  Sales gains as well asrnprice increases were broad based, affecting all four regions of the country.</p

Total existing homes sales, including those of single-familyrnresidences, condos, townhomes, and cooperative apartments, were at a seasonallyrnadjusted annual rate of 5.49 million units in June, a 3.2 percent increase fromrnMay and 9.6 percent higher than in June 2014. rnSales in May, originally estimated at a rate of 5.35rnmillion units did suffer a slight downward revision to 5.32 million.</p

NAR said June sales werernat the highest rate since the 5.79 million posted in February 2007 and havernincreased on an annual basis for nine consecutive months.  June sales a year ago were estimated at arnrate of 5.01 million. </p

Lawrence Yun, NAR chief economist, saysrn”Buyers have come back in force, leading to the strongest past two monthsrnin sales since early 2007.  This wave of demand is being fueled by a year-plus ofrnsteady job growth and an improving economy that’s giving more households thernfinancial wherewithal and incentive to buy.”</p

He added, “June sales were alsornlikely propelled by the spring’s initial phase of rising mortgage rates, whichrnusually prods some prospective buyers to buy now rather than wait until laterrnwhen borrowing costs could be higher.”</p

Single-family home sales increased 2.8rnpercent to a seasonally adjusted annual rate of 4.84 million in June from 4.71rnmillion in May, and are now 9.8 percent above the 4.41 million pace a year ago.rnExisting condominium and co-op sales rose 6.6 percent to a seasonally adjustedrnannual rate of 650,000 units in June from 610,000 units in May, up 8.3 percentrnfrom June 2014 (600,000 units) and the highest pace since May 2007 (680,000rnunits). </p

The median existing-home price in Junernwas $236,400, a 6.5 percent year-over-year change, surpassing the $230,400 peakrnmedian set in July 2006.  It was the 40^{th</supconsecutive month} of year-over-year gains. The median existing single-family homernprice was $237,700, a 6.6 percent annual increase, besting the previous peak ofrn$230,900 in July 2006.  The existingrncondo price was $226,500 in June, which is 5.5 percent above a year ago and thernhighest median price since August 2007 ($229,200).</p

There was an increase of 0.9 percent inrnthe number of available existing homes for sale, a total of 2.30 million or arn5.0 month supply at the current rate of sales. rnThe inventory is up 0.4 percent in actual numbers of homes availablerncompared to a year earlier but the supply was down from 5.1 percent inrnMay.   </p

“Limited inventory amidst strongrndemand continues to push home prices higher, leading to declining affordabilityrnfor prospective buyers,” said Yun. “Local officials in recent yearsrnhave rightly authorized permits for new apartment construction, but more needsrnto be done for condominiums and single-family homes.”</p

The percent share of first-time buyersrnfell to 30 percent in June from 32 percent in May, but remained at or above 30rnpercent for the fourth consecutive month. rnIndividual investors purchased 12 percent of homes compared to 14rnpercent in May and 16 percent a year earlier.  Sixty-six percent of investors paid all cashrnfor their purchases and all cash ales accounted for 22 percent of transactions,rndown from 24 percent in May and 32 percent in June 2014.  Cash sales matched the lowest share sincernDecember 2009 and investor purchases made up the smallest share of sales in 11rnmonths.</p

Six percent of June sales werernforeclosures and 2 percent were short sales. Combined, distressed sales werernthe lowest since last August and are down from 11 percent in June 2014.  Foreclosures sold for an average discount ofrn15 percent below market value in June, the same as in May, while short salesrnwere discounted 18 percent (16 percent in May).</p

Properties typically stayed on thernmarket for 34 days in June, six fewer days than in May and the shortest timernsince NAR began tracking in May 2011. Short sales took a median of 129 days tornsell while foreclosures sold in 39 days and non-distressed homes took 33 days.rnForty-seven percent of homes sold in June were on the market for less than arnmonth, tying the previous low set in June 2013.</p

NAR President Chris Polychron saysrnRealtors are reporting drastic imbalances of supply in relation to demand inrnmany metro areas – especially in the West. “The demand for buying has reallyrnheated up this summer, leading to multiple bidders and homes selling at orrnabove asking price⁴,” he said. “Furthermore, tightrninventory conditions are being exacerbated by the fact that some homeowners arernhesitant to sell because they’re not optimistic they’ll have adequate time tornfind an affordable property to move into.”</p

All major regions experienced salesrngains in June and have now risen above year-over-year levels for sixrnconsecutive months.  In the Northeastrnexisting home sales rose 4.3 percent to an annual rate of 720,000, and are nowrn12.5 percent above a year ago. The median price in the Northeast was $281,200, anrnannual increase of 3.9 percent. </p

Midwest sales were up 4.7 percent to anrnannual rate of 1.33 million in June, 12.7 percent higher than in June 2014. Thernmedian price in the Midwest was $190,000, up 7.2 percent from a year ago.</p

Existing-home sales in the Southrnincreased 2.3 percent to an annual rate of 2.20 million and are 7.3 percentrnabove the previous June. The median price in the South was $205,000, representingrna 7.2 percent annual gain.

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