Existing home sales up again in the US, but number of first time buyers falls

Existing home sales in the United States steadily increased for the third consecutive month in July, according to the latest data from the National Association of Realtors (NAR).

However, stubbornly low inventory levels and rising prices have resulted in sales to first time buyers falling to their lowest share since January.

The data shows that total existing home sales increased 2% to a seasonally adjusted annual rate of 5.59 million in July from a downwardly revised 5.48 million in June.

Sales in July remained at the highest pace since February 2007 when they were 5.79 million and have now increased year on year for 10 months in a row and are 10.3% above a year ago when they were 5.07 million.

Lawrence Yun, NAR chief economist, explained that the increase in sales in July solidifies what has been an impressive growth in activity during this year's peak buying season. ‘The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now,’ he said.

‘As a result, current home owners are using their increasing housing equity towards the down payment on their next purchase,’ he added.

The data also shows that the median existing home price for all housing types in July was $234,000, which is 5.6% above July 2014. July's price increase marks the 41st consecutive month of year on year gains.

‘Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand. Agents in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains,’ Yun pointed out.

Total housing inventory at the end of July declined 0.4% to 2.24 million existing homes available for sale, and is now 4.7% lower than a year ago when it was 2.35 million. Unsold inventory is at a 4.8 month supply at the current sales pace, down from 4.9 months in June.

The percent share of first time buyers declined in July for the second consecutive month, falling from 30% in June to 28%, the lowest share since January of this year when it was also 28%. A year ago, first time buyers represented 29% of all buyers.

‘The fact that first time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face,’ said Yun.

‘Rising rents and flat wage growth make it difficult for many to save for a down payment, and the dearth of supply in affordable price ranges is limiting their options,’ he added.

Properties typically stayed on the market for 42 days in July, an increase from 34 days in June but below the 48 days in July 2014. Short sales were on the market the longest at a median of 135 days in July, while foreclosures sold in 49 days and non-distressed homes took 41 days. Some 43% of homes sold in July were on the market for less than a month.

All cash sales increased slightly to 23% of transactions in July compared to 22% in June but are down from 29% a year ago. Individual investors, who account for many cash sales, purchased 13% of homes in July, up from 12% in June but down from 16% in July 2014. Some 64% of investors paid cash in July.

Representing the lowest share since NAR began tracking in October 2008, distressed sales, that is foreclosures and short sales, fell to 7% in July from 8% in June and 9% a year ago. Some 5% of July sales were foreclosures and 2% were short sales.

The NAR data also shows that foreclosures sold for an average discount of 17% below market value in July compared to 15% in June, while short sales were discounted 12% compared to 18% in June.

NAR president Chris Polychron, believes that the housing market is in a much better place and has come a long way since the depths of the recession. ‘Five years ago, distressed sales represented 33% of the market in July,’ he pointed out.

‘For many previously distressed home owners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments,’ added Polychron.

A breakdown of the figures shows that single family home sales increased 2.7% to a seasonally adjusted annual rate of 4.96 million in July, the highest since February and are now 11% above a year ago. The median existing single family home price was $235,500 in July, up 5.8% from July 2014.

Existing condominium and co-op sales fell 3.1% to a seasonally adjusted annual rate of 630,000 units in July but are still up 5% from July 2014. The median existing condo price was $221,800 in July, which is 3.2% above a year ago.

July existing home sales in the Northeast decreased 2.8% to an annual rate of 700,000, but are still 9.4% above a year ago. The median price in the Northeast was $277,200, which is 1.3% higher than July 2014.

In the Midwest, existing home sales were at an annual rate of 1.32 million in July, unchanged from June and 10.9% above July 2014. The median price in the Midwest was $186,500, up 6.6% from a year ago.

Existing home sales in the South increased 4.1% to an annual rate of 2.29 million in July, and are 9.6% above July 2014. The median price in the South was $203,500, up 7% from a year ago.

The data also shows that existing home sales in the West rose 3.2% to an annual rate of 1.28 million in July, and are 11.3% above a year ago. The median price in the West was $327,400, which is 8.4% above July 2014.