WASHINGTON (August 20, 2015) — Existing-home sales steadily increased for the third consecutive month in July, while stubbornly low inventory levels and rising prices are likely to blame for sales to first-time buyers falling to their lowest share since January, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent 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 (5.79 million), have now increased year-over-year for ten consecutive months and are 10.3 percent above a year ago (5.07 million).
Lawrence Yun, NAR chief economist, says 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 homeowners are using their increasing housing equity towards the downpayment on their next purchase."
The median existing-home price2 for all housing types in July was $234,000, which is 5.6 percent above July 2014. July's price increase marks the 41st consecutive month of year-over-year gains.
"Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand," adds Yun. "Realtors® 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."
Total housing inventory3 at the end of July declined 0.4 percent to 2.24 million existing homes available for sale, and is now 4.7 percent lower than a year ago (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 percent in June to 28 percent — the lowest share since January of this year (also 28 percent). A year ago, first-time buyers represented 29 percent 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," adds Yun. "Rising rents and flat wage growth make it difficult for many to save for a downpayment, and the dearth of supply in affordable price ranges is limiting their options."
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage climbed to 4.05 percent in July from 3.98 percent in June — the first time above 4 percent since November 2014 (4.00 percent) and the highest since September 2014 (4.16 percent).
Properties typically stayed on the market for 42 days in July, an increase from June (34 days) 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. Forty-three percent of homes sold in July were on the market for less than a month.
All-cash sales increased slightly to 23 percent of transactions in July (22 percent in June) but are down from 29 percent a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in July, up from 12 percent in June but down from 16 percent in July 2014. Sixty-four percent of investors paid cash in July.
Representing the lowest share since NAR began tracking in October 2008, distressed sales4 — foreclosures and short sales — declined to 7 percent in July from 8 percent in June; they were 9 percent a year ago. Five percent of July sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in July (15 percent in June), while short sales were discounted 12 percent (18 percent in June).
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says 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 percent of the market in July," he said. "For many previously distressed homeowners 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."
Single-family and Condo/Co-op Sales
Single-family home sales increased 2.7 percent to a seasonally adjusted annual rate of 4.96 million in July (highest since February 2007 at 5.08 million) from 4.83 million in June, and are now 11.0 percent above the 4.47 million pace a year ago. The median existing single-family home price was $235,500 in July, up 5.8 percent from July 2014.
Existing condominium and co-op sales fell 3.1 percent to a seasonally adjusted annual rate of 630,000 units in July from 650,000 units in June, but are still up 5.0 percent from July 2014 (600,000 units). The median existing condo price was $221,800 in July, which is 3.2 percent above a year ago.
Regional Breakdown
July existing-home sales in the Northeast decreased 2.8 percent to an annual rate of 700,000, but are still 9.4 percent above a year ago. The median price in the Northeast was $277,200, which is 1.3 percent 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 percent above July 2014. The median price in the Midwest was $186,500, up 6.6 percent from a year ago.
Existing-home sales in the South increased 4.1 percent to an annual rate of 2.29 million in July, and are 9.6 percent above July 2014. The median price in the South was $203,500, up 7.0 percent from a year ago.
Existing-home sales in the West rose 3.2 percent to an annual rate of 1.28 million in July, and are 11.3 percent above a year ago. The median price in the West was $327,400, which is 8.4 percent above July 2014.
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NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.
1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.
Existing-home sales, based on closings, differ from the U.S. Census Bureau's series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample — about 40 percent of multiple listing service data each month — and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
2The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.
The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR's quarterly metro area price reports.
3Total inventory and month's supply data are available back through 1999, while single-family inventory and month's supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).
4Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR's Realtors® Confidence Index, posted at Realtor.org.
NOTE: The Pending Home Sales Index for July will be released August 27, and Existing-Home Sales for August will be released September 21; release times are 10:00 a.m. EDT.
Read more: Existing-Home Sales Maintain Solid Growth in July
NAR President Chris Polychron testifying before the U.S. House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet
WASHINGTON (September 10, 2015) – Today, National Association of Realtors® President Chris Polychron testified before the U.S. House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet at a hearing entitled “Unmanned Aerial Vehicles: Commercial Applications and Public Policy Implications.” NAR testified on the growing interest in the use of drones, their commercial application in the real estate industry, and Realtor® perspectives on legislative and regulatory efforts to advance safe drone use in the commercial space.
“Commercial use of unmanned aircraft systems, or UASs, has the potential to create new jobs and businesses specializing in their uses,” Polychron said in testimony before the subcommittee. “NAR and its members are excited about these possibilities but also understand the need to balance them with protecting the privacy and safety of citizens and other users of the country’s National Air Space. As end-users of drone technology, Realtors® want clear regulation that permits the commercial application of UASs in a way that is affordable to users and safe for their communities, both on the ground and in the air.”
NAR has been working closely with the Federal Aviation Administration and others to advance a responsible approach to commercial drone use. To that end, NAR joined the “Know Before you Fly” campaign earlier this year and is a part of the National Telecommunications and Information Administration’s “Multistakeholder Process: Unmanned Aircraft Systems,” a working group on privacy as it relates to the use of drones.
In his testimony, NAR President Chris Polychron applauded the House Judiciary Subcommittee for its attention to this issue. “Realtors® have shown a consistent interest in the safe, responsible use of drones in the business of real estate, and I appreciate Chairman Darrell Issa and Ranking Member Jerrold Nadler for giving us the opportunity to share that perspective,” he said. “We look forward to a continued partnership with the committee as our work on this important issue moves forward.”
Although wide-scale commercial use of drones is currently prohibited, the FAA has worked to streamline a waiver process for individuals and businesses interested in using drones. So far, the FAA has issued over 1,300 such waivers. A significant percentage of those waivers have gone to users in the real estate business.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing over 1.1 million members involved in all aspects of the residential and commercial real estate industries.
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WASHINGTON (September 9, 2015) — Despite positive improvements in the labor market in recent years, new home construction is currently insufficient in a majority of metro areas and is contributing to persistent housing shortages and unhealthy price growth in many markets, according to new research from the National Association of Realtors®.
NAR measured the volume of new home construction relative to the number of newly employed workers in 146 metropolitan statistical areas1 (MSAs) throughout the U.S. to determine whether homebuilding has kept up with the steadily improving pace of job growth in the past three years2. The findings reveal that homebuilding activity for all housing types is underperforming in roughly two–thirds of measured metro areas.
Lawrence Yun, NAR chief economist, says low inventory has been a prevailing headwind to the housing market in recent years. "In addition to slow housing turnover and the diminishing supply of distressed properties, lagging new home construction — especially single family — has kept available inventory far below balanced levels," he said. "Our research shows that even as the labor market began to strengthen, homebuilding failed to keep up and is now contributing to the stronger price appreciation and eroding affordability currently seen throughout the U.S."
NAR’s study analyzed job creation in 146 metro areas from 2012 to 2014 relative to single–family and multifamily housing starts over the same period. Historically, the average ratio for the annual change in total workers to total permits is 1.2 for all housing types and 1.6 for single–family homes. The research found that through 2014, 63 percent of measured markets had a ratio above 1.2 and 72 percent had a ratio above 1.6, which indicates inadequate new construction.
According to Yun, with jobs now being added at a more robust pace in several metro areas, the disparity between housing starts and employment is widening. In 2014 alone, the average ratio of single–family permits to employment jumped to 3.7, while the ratio for total permits increased 50 percent to 2.4.
"Affordability issues for buying and renting because of low supply are already well–known in many of the country’s largest metro areas, including San Francisco, San Diego and New York," says Yun. "Additionally, our study found that limited construction is a widespread issue in metro areas of all sizes."
The markets with the largest disparity of jobs versus home construction (single–family) and currently facing supply shortages are San Jose, Calif., at 22.6; San Francisco, 22.4; San Diego and New York, at 13.9; and Miami, 11.1.
"While construction is limited in some markets — such as Trenton–Ewing, N.J. and Rockford, Ill. — they aren’t facing inventory shortages despite having high ratios because their job gains are more moderate," adds Yun.
Single–family housing starts are seen as nearly adequate to local job growth (a ratio of 1.6) in Jackson, Miss.; Colorado Springs, Colo.; Chattanooga, Tenn.; Amarillo, Tex.; and St. Louis.
Looking ahead, Yun says there’s no question the homebuilding industry continues to face many challenges, including rising construction and labor costs, limited credit availability for smaller builders and concerns about the re–emergence of first–time buyers. However, the strong job growth seen so far in 2015, and only muted gains in single–family housing starts, suggests that sustained price growth will continue to put pressure on affordability.
"The demand for buying has drastically improved this year and is propelling home sales to a pace not seen since 2007," says Yun. "As local job markets continue to expand, the pool of homebuyers will only increase. That’s why it’s crucial for builders to begin shifting their focus from apartments to the purchase market and make up for lost time. If not, severe housing shortages and faster price appreciation will erode affordability and remain a burden for buyers trying to reach the market."
The National Association of Realtors®, "The Voice for Real Estate," is America’s largest trade association, representing over 1.1 million members involved in all aspects of the residential and commercial real estate industries.
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1Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. NAR adheres to the OMB definitions, although in some areas an exact match is not possible from the available data. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/List4.txt.
2NAR’s study analyzed homebuilding permits and employment data during the years of 2012 through 2014.
Read more: NAR Study: New Home Construction Trailing Job Growth in Majority of Metro Areas
WASHINGTON (August 27, 2015) — Pending home sales were mostly unchanged in July, but rose modestly for the sixth time in seven months, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, marginally increased 0.5 percent to 110.9 in July from an upwardly revised 110.4 in June and is now 7.4 percent above July 2014 (103.3). The index has increased year-over-year for 11 consecutive months and is the third highest reading of 2015, behind April (111.6) and May (112.3).
Lawrence Yun, NAR chief economist, says the housing market began the second half of 2015 on a positive note, with pending sales slightly rising in July. "Led by a solid gain in the Northeast, contract activity in most of the country held steady last month, which bodes well for existing-sales to maintain their recent elevated pace to close out the summer," he said. "While demand and sales continue to be stronger than earlier this year, Realtors® have reported since the spring that available listings in affordable price ranges remain elusive for some buyers trying to reach the market and are likely holding back sales from being more robust."
Looking ahead, with inventory shortages likely to persist into the fall, Yun expects the national median existing-home price to increase 6.3 percent in 2015 to $221,400. Yun forecasts total existing-home sales this year to increase 7.1 percent to around 5.29 million, about 25 percent below the prior peak set in 2005 (7.08 million).
"In light of the recent volatility in the stock market, it's possible some prospective buyers may err on the side of caution and delay decisions, while others may view real estate as a more stable asset in the current environment," said Yun. "Overall, the prospects for ongoing strength in the housing market remain intact for now. The U.S. economy is growing — albeit at a modest pace — and the labor market continues to add jobs."
Adds Yun, "Uncertainty in the equity markets — even if the Fed raises short-term rates in September — could stabilize long-term mortgage rates and preserve affordability for buyers."
The PHSI in the Northeast increased 4.0 percent to 98.8 in July, and is now 12.1 percent above a year ago. In the Midwest the index remained unchanged at 107.8 in July, and is now 5.7 percent above July 2014.
Pending home sales in the South increased slightly (0.6 percent) to an index of 124.2 in July and are now 6.5 percent above last July. The index in the West declined 1.4 percent in July to 103.0, but is still 7.5 percent above a year ago.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
NOTE: Existing-home Sales for August will be reported September 21, and the next Pending Home Sales Index will be September 28; release times are 10:00 a.m. EDT.