Rising home prices and lack of supply continued to push existing-home sales downward during the second quarter, according to the National Association of Realtors (NAR).
Sales of existing single-family homes and condos were at a seasonally adjusted annual rate of 5.41 million, down 1.7% from a rate of 5.51 million in the first quarter and down 2.4% from 5.55 million in the second quarter of 2017, NAR’s data shows.
Regionally, existing-home sales were down 4.1% quarter-over-quarter in the West and 2.7% in the South. However, sales were up 1.6% in the Midwest. They were flat in the Northeast.
Rising home prices and lack of supply continue to be the main factors holding home sales back.
Lawrence Yun, chief economist for NAR, says builders are being hampered by rising materials costs as well as strict local regulations which slow the construction process.
“The unaffordable conditions in many of the largest metro areas – especially in the West – continues to be a growing concern for many middle-class households aspiring to buy a home,” Yun says in a statement. “Homebuilders, facing higher costs and labor shortages, are simply not producing enough affordable homes to satisfy demand. Local governments need to acknowledge this glaring issue and ease some of the zoning laws, permitting processes and regulations that are slowing construction.”
NAR also releases its existing-home sales data on a monthly basis.
In terms of home prices, the national median existing single-family home price in the second quarter was $269,000, an increase of 5.3% from $255,400 in the second quarter of 2017.
What’s more, single-family home prices in the second quarter increased year-over-year in 90% of measured markets.
“Solid economic growth, a healthy labor market and the large millennial population should be driving home sales much higher,” Yun says. “As long as economic conditions maintain current levels, there’s still a chance for sales to break out this year.
“However, with mortgage rates trending higher, it will only happen if supply levels improve enough to cool the speedy price growth in a majority of the country,” he adds.
As of the end of the second quarter, there were 1.95 million existing-homes available for sale, about a 4.1-month supply at the current sales rate.