June Housing Report – Sales Pace At a Snails Pace
Existing-home sales went up in June reaching an annual pace of 5 million sales for the first time since October 2013. Inventory is still rising and continues to push overall supply towards a more balanced market.
Total existing-home sales climbed 2.6 percent to a seasonally adjusted annual rate of 5.04 million in June from an upwardly-revised 4.91 million in May. Sales remain 2.3 percent below the 5.16 million-unit level a year ago but are at the highest pace since October 2013. Sluggish income growth, especially with potential first-time buyers, is a component of the lagging pace of sales. Lawrence Yun, National Association of Realtors chief economist substantiates:
Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month. However, the lack of wage increases is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability.
Despite some of the numbers, Yun thinks housing is moving in the right direction:
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. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices. On the contrary, new home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages – particularly in the West – are still putting upward pressure on prices.
A forward-looking indicator based on contract signings, the Pending Home Sales Index, declined 1.1 percent to 102.7 in June from 103.8 in May, and is 7.3 percent below June 2013 (110.8). After three consecutive months of solid gains, pending home sales slowed modestly in June. The housing market is stabilizing, according to Yun but ongoing challenges are impeding full sales potential. Despite these headwinds, Yun believes that there will be an uptick in sales in the second half of the year:
The good news is that price appreciation has decreased to its slowest pace since March 2012 behind much needed increases in inventory. With rents rising 4 percent annually, potential buyers are less likely to experience sticker shock and can make smart decisions on whether or not it makes sense to buy or continue renting.
For all homes sold in June, the average Days on Market was 62, 4 days lower than the average seen in May and 3 days lower than the average in June last year. June is the 25th consecutive month with an average Days on Market below 90. The low Days on Market average continues to be the result of a low inventory of homes for sale and high demand.
What’s are the Gen Y’s up to?
Austin already has a large number of Millennials while job growth remains strong.
Dallas has a large number of Millennials living in the city and strong job growth.
Denver has seen a solid inflow of Millennials while it shows promising job growth and gains in median home prices.
Des Moines has a large number of Millennials moving to the city and a low unemployment rate.
Many Millennials have moved to Grand Rapids where job growth is strong and homes are very affordable.
Minneapolis has experienced a solid inflow of Millennials and has a growing inventory of homes for sale.
Millennials have been moving to New Orleans where the unemployment rate has shown significant improvement.
Large numbers of Millennials live in Ogden where the unemployment rate is low and inventory conditions are favorable.
Salt Lake City has a low unemployment rate and inventory choices are expanding.
Millennials continue to move to Seattle where the inventory of homes for sale is expanding and unemployment is falling.