Existing-home sales increased to a seasonally adjusted annual rate of 5.04 million in June from an upwardly revised 4.91 million in May – a 2.6% increase – according to the National Association of Realtors (NAR).
It was the first month since October 2013 that the annual pace of home sales reached 5 million, according to NAR. Still, existing home sales were 2.3% below the rate recorded one year ago.
NAR says increased inventory was a factor driving the increased sales of previously owned single-family homes, townhouses, condominiums and co-ops. Total inventory at the end of June rose 2.2% to 2.30 million existing homes available for sale – a 5.5-month supply at the current sales pace. Unsold inventory was 6.5% higher compared to May 2013, when there were 2.16 million existing homes available for sale.
‘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,’ says Lawrence Yun, chief economist for NAR, in a statement. ‘This bodes well for rising home sales in the upcoming months as consumers are provided with more choices.’
However, ‘new home construction needs to rise by at least 50 percent for a complete return to a balanced market because of supply shortages,’ Yun adds. This is particularly true for the West, where lack of new home inventory is ‘still putting upward pressure on prices.’
A major factor still holding back home sales is stagnant wage growth, Yun notes. Although the U.S. Department of Labor reports that there has been an average of 230,000 jobs added each month so far this year, ‘the lack of wage increases is leaving a large pool of potential home buyers on the sidelines,’ he says.
The median asking price for existing homes of all types in June was $223,300, a 4.3% increase compared to June 2013. On a year-over-year basis, the median home price had, as of June, increased for 28 consecutive months.
Foreclosures and short sales accounted for about 11% of June sales, down from 15% in June 2013. About 8% of June sales were foreclosures and 3% were short sales, according to NAR.
The percentage of first-time buyers rose slightly to reach 28% in June, up from 27% in May. In the ‘old economy,’ first-time home buyers represented anywhere from 30% to 40% of all home sales.
Steve Brown, president of NAR, says the high cost of mortgage insurance is deterring some credit-worthy first-time home buyers from entering the market.
‘Access to affordable credit continues to hamper young, prospective first-time buyers,’ he says. ‘NAR recommends that [the Federal Housing Administration (FHA)] reduce high annual mortgage insurance premiums for all qualified home buyers and eliminate the insurance requirement for the life of the loan.’
Brown notes that while the FHA's Homeowners Armed With Knowledge (HAWK) program is a good start, ‘it should offer further reductions for participating home buyers.’
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