NAR: Severe Housing Shortage Not Releasing its Grip

Real Estate In-Depth | July 2018

WASHINGTON— Existing-home sales decreased for the third straight month in June, as declines in the South and West exceeded sales gains in the Northeast and Midwest, according to a report released by the National Association of Realtors on July 23. The ongoing supply and demand imbalance helped push June’s median sales price to a new all-time high.

Total existing-home sales (https://www.nar.realtor/existing-home-sales), which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 0.6% to a seasonally adjusted annual rate of 5.38 million in June from a downwardly revised 5.41 million in May. With last month’s decline, sales are now 2.2% below a year ago.

Lawrence Yun, NAR chief economist, says closings inched backwards in June and fell on an annual basis for the fourth straight month. “There continues to be a mismatch since the spring between the growing level of homebuyer demand in most of the country in relation to the actual pace of home sales, which are declining,” he said. “The root cause is without a doubt the severe housing shortage that is not releasing its grip on the nation’s housing market. What is for sale in most areas is going under contract very fast and in many cases, has multiple offers. This dynamic is keeping home price growth elevated, pricing out would-be buyers and ultimately slowing sales.”

Lawrence Yun, NAR, Chief Economist

The median existing-home price for all housing types in June was $276,900, surpassing last month as the new all-time high and up 5.2% from June 2017 ($263,300). June’s price increase marked the 76th straight month of year-over-year gains.

Total housing inventory at the end of June climbed 4.3% to 1.95 million existing homes available for sale, and was 0.5% above a year ago (1.94 million) – the first year-over-year increase since June 2015. Unsold inventory was at a 4.3-month supply at the current sales pace (4.2 months a year ago).

Properties typically stayed on the market for 26 days in June, unchanged from the last three months and down from 28 days a year ago. Fifty-eight percent of homes sold in June were on the market for less than a month.

“It’s important to note that despite the modest year-over-year rise in inventory, the current level is far from what’s needed to satisfy demand levels,” added Yun. “Furthermore, it remains to be seen if this modest increase will stick, given the fact that the robust economy is bringing more interested buyers into the market, and new home construction is failing to keep up.”

Realtor.com’s Market Hotness Index, measuring time-on-the-market data and listings views per property, revealed that the hottest metro areas in June were Midland, TX; Columbus, OH; Boston-Cambridge-Newton, MA.; Fort Wayne, IN.; and Boise City, ID.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 4.57% in June from 4.59% in May. The average commitment rate for all of 2017 was 3.99%.

“Realtors throughout the country continue to stress that there’s considerable pent-up demand for buying a home among the millennial households in their market,” said Yun. “Unfortunately, they’re just not making meaningful ground, and continue to be held back by too few choices in their price range, and thereby missing out on homeownership and wealth gains.”

First-time buyers were 31% of sales in June, which was unchanged from last month and down from 32% year ago. NAR’s 2017 Profile of Home Buyers and Sellers—released in late 2017—revealed that the annual share of first-time buyers was 34%.

National Association of Realtors’ President Elizabeth Mendenhall

“The modest uptick in new listings last month is perhaps good news for would-be buyers who are still in the market after a highly competitive spring buying season,” said NAR President Elizabeth Mendenhall, a sixth-generation Realtor from Columbia, MI and CEO of RE/MAX Boone Realty. “As summer winds down, the number of home shoppers begins to decrease. Listings are still scarce—especially for entry-level homes—but patience may yield a positive result for those looking to buy in the months ahead.”

All-cash sales were 22% of transactions in June, up from 21% in May and 18% a year ago. Individual investors, who account for many cash sales, purchased 13% of homes in June, down from 15% in May and unchanged from a year ago.

Distressed sales—foreclosures and short sales—were 3% of sales in June (lowest since NAR began tracking in October 2008), unchanged from last month and down from 4% a year ago. Two percent of June sales were foreclosures and 1% were short sales.

Single-Family and Condo/Co-op Sales

Single-family home sales declined 0.6% to a seasonally adjusted annual rate of 4.76 million in June from 4.79 million in May, and were 2.3% below the 4.87 million sales pace a year ago. The median existing single-family home price was $279,300 in June, up 5.2% from June 2017.

Existing condominium and co-op sales were at a seasonally adjusted annual rate of 620,000 units in June (unchanged from last month), and were 1.6% below a year ago. The median existing condo price was $258,100 in June, which was 4.9% above a year ago.

Regional Breakdown

June existing-home sales in the Northeast jumped 5.9% to an annual rate of 720,000, but were still 4.0% below a year ago. The median price in the Northeast was $305,900, which was up 3.3% from June 2017.

In the Midwest, existing-home sales edged up 0.8% to an annual rate of 1.27 million in June, but were 3.1% below a year ago. The median price in the Midwest was $218,800, up 3.5% from a year ago.

Existing-home sales in the South decreased 2.2% to an annual rate of 2.25 million in June, but were still 0.4% higher than a year ago. The median price in the South was $237,500, up 2.7% from a year ago.

Existing-home sales in the West declined 2.6% to an annual rate of 1.14 million in June, and were 5.0% below a year ago. The median price in the West was $417,400, up 10.2% from June 2017.