NAR Describes Inventory Levels as ‘Pitiful’

WASHINGTON—The National Association of Realtors released two telling reports this month that detailed the anemic levels of home sale inventory, describing supply conditions as “pitiful” and inventory shortages in some markets as “severe.”

In a report released on second quarter home sale prices, NAR stated the headstrong supply and demand imbalances in much of the country slightly tempered the pace of sales and caused home prices to maintain their robust growth in the second quarter.

The national median existing single-family home price in the second quarter was $255,600, which was up 6.2% from the second quarter of 2016 ($240,700) and surpasses the third quarter of last year ($241,300) as the new peak quarterly median sales price. The median price during the first quarter increased 6.9% from the first quarter of 2016.

Single-family home prices last quarter increased in 87% of measured markets, with 154 out of 178 metropolitan statistical areas (MSAs) showing sales price gains in the second quarter compared with the second quarter of 2016. Twenty-three areas (13%) recorded lower median prices from a year earlier.

Lawrence Yun, NAR chief economist, says home prices in most metro areas continued their fast ascent in the second quarter because supply remained at pitiful levels. “The 2.2 million net new jobs created over the past year generated significant interest in purchasing a home in what was an extremely competitive spring buying season,” he said. “Listings typically flew off the market in under a month—and even quicker in the affordable price range — in several parts of the country. With new supply not even coming close to keeping pace, price appreciation remained swift in most markets.”

In its report released on Aug. 24th on July home sales activity, NAR stated that listings in July typically went under contract in under 30 days for the fourth consecutive month because of high buyer demand, but existing-home sales ultimately pulled back as large declines in the Northeast and Midwest outweighed sales increases in the South and West.

Total existing-home sale, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, slipped 1.3% to a seasonally adjusted annual rate of 5.44 million in July from a downwardly revised 5.51 million in June. July’s sales pace was still 2.1% above a year ago, but is the lowest of 2017.

Yun, says the second half of the year got off on a somewhat sour note as existing sales in July inched backward. “Buyer interest in most of the country has held up strongly this summer and homes are selling fast, but the negative effect of not enough inventory to choose from and its pressure on overall affordability put the brakes on what should’ve been a higher sales pace,” he said. “Contract activity has mostly trended downward since February and ultimately put a large dent on closings last month.”

The median existing-home price for all housing types in July was $258,300, up 6.2% from July 2016 ($243,200). July’s price increase marks the 65th straight month of year-over-year gains.

Total housing inventory at the end of July declined 1.0% to 1.92 million existing homes available for sale, and was 9.0% lower than a year ago (2.11 million) and has fallen year-over-year for 26 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which was down from 4.8 months a year ago.

“Home prices are still rising above incomes and way too fast in many markets,” said Yun. “Realtors continue to say prospective buyers are frustrated by how quickly prices are rising for the minimal selection of homes that fit buyers’ budget and wish list.”

Properties typically stayed on the market for 30 days in July, which was up from 28 days in June but down from 36 days a year ago. A total of 51% of homes sold in July were on the market for less than a month.

Inventory data from Realtor.com reveals that the metropolitan statistical areas where listings stayed on the market the shortest amount of time in July were Seattle-Tacoma-Bellevue, WA, 28 days; San Jose-Sunnyvale-Santa Clara, CA, 30 days; and Salt Lake City, UT, and Vallejo-Fairfield, CA, 31 days.

First-time buyers were 33% of sales in July, which was up from 32% both in June and a year ago. NAR’s 2016 Profile of Home Buyers and Sellers— released in late 2016—revealed that the annual share of first-time buyers was 35%.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 3.97% in July from 3.90% in June. The average commitment rate for all of 2016 was 3.65%.

All-cash sales were 19% of transactions in July, up from 18% in June but down from 21% a year ago. Individual investors, who account for many cash sales, purchased 13% of homes in July, unchanged from June and up from 11% a year ago. Distressed sales—foreclosures and short sales—were 5% of sales in July, up from 4% in June and unchanged from a year ago. Four percent of July sales were foreclosures and 1% were short sales.

Single-family and Condo/Co-op Sales

Single-family home sales decreased 0.8% to a seasonally adjusted annual rate of 4.84 million in July from 4.88 million in June, but were still 1.7% above the 4.76 million pace a year ago. The median existing single-family home price was $260,600 in July, up 6.3% from July 2016.

Existing condominium and co-op sales fell 4.8% to a seasonally adjusted annual rate of 600,000 units in July, but were still 5.3% higher than a year ago. The median existing condo price was $239,800 in July, which was 5.3% above a year ago.

Regional Breakdown

July existing-home sales in the Northeast dropped 14.5% to an annual rate of 650,000, and were 1.5% below a year ago. The median price in the Northeast was $290,000, which was 4.1% above July 2016.

In the Midwest, existing-home sales fell 5.3% to an annual rate of 1.25 million in July, and were 1.6% below a year ago. The median price in the Midwest was $205,400, up 5.9% from a year ago.

Existing-home sales in the South rose 2.2% to an annual rate of 2.28 million in July, and were 3.6% higher than a year ago. The median price in the South was $227,700, up 6.7% from a year ago. Existing-home sales in the West jumped 5.0% to an annual rate of 1.26 million in July, and were 5.0% above a year ago.

John Jordan
Editor, Real Estate In-Depth