Statistics released this week by the National Association of Realtors have revealed some encouraging signs as concern remains regarding the slowing pace of the United States’ housing market recovery. According to the NAR, existing home sales were up in June 2014, and reached the annualized rate of 5 million sales per year for the first time in more than half a year.
Total sales of existing homes, which cover single-family properties, condominiums, co-ops, and townhomes, increased 2.6 percent to an annualized and seasonally adjusted rate of 5.04 million in June, from the previous month’s upwardly-revised figure of 4.91 million. This is the highest annualized rate on record since October 2013, though it remains 2.3 percent lower than the previous June’s reading of 5.16 million annualized sales.
According to NAR chief economist Lawrence Yun, housing-related metrics are now moving in a positive trajectory. “Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country,” said Yun. “This bodes well for rising home sales in the upcoming months as consumers are provided with more choices.” He added, however, that new home construction stats need a more marked improvement – one of at least 50 percent – in order for the housing market to achieve equilibrium. This is because supply shortages, especially in the Western part of the U.S., are still driving prices upwards.
In terms of housing sales, Yun believes that a lack of wage growth has been a drag against sales stats. Hiring, however, was described as a “bright spot”, as the U.S. has created an average of about 230,000 new jobs per month. Describing the downside of employment-related stats, Yun said that laggard wage growth “is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates.”
Other relevant numbers included an increase of total housing inventory, as this metric increased 2.2 percent in June to a total of 2.30 million existing homes available to be sold. This redounds to a 5.5-month supply considering current sales figures, same as it was in May. Unsold inventory, on the other hand, experienced a 6.5 percent year-over-year increase from the previous June. Median existing home prices were at $223,300 in June 2014, an increase of 4.3 percent from June 2013’s reading and the 28th straight month in which home prices increased year-over-year.
Foreclosures and short sales, or distressed home sales, made up 11 percent of June’s sales, a decrease from the 15 percent share in June 2013. Specifically, 8 percent of sales were foreclosures, and 3 percent of these sales were short sales. Foreclosures were discounted by an average of 20 percent below the average market value, while short sales had values of 11 percent cheaper.
It was distressing, however, to note that the share of first-time home buyers is still historically low, rising ever so slightly to 28 percent in June from the previous month’s 27 percent. The share of this sector remains at 28 percent when averaged over the past 12 months. According to NAR President Steven C. Brown, the main variable holding first-time buyers down is the continually premium cost of Federal Housing Administration insurance, these buyers’ credit scores notwithstanding.