Existing home sales rose 2.6 percent in June, which was better than expected. Sales of single-family homes increased 2.5 percent, the third-consecutive monthly gain. Distressed transactions remained unchanged.
Existing Sales Activity Shows Third Monthly Gain
Existing home sales rose 2.6 percent in June to a 5.04 million-unit pace, which was more than expected. The headline increased to its highest level since October 2013, when sales reached a 5.13 million-unit rate. June’s improvement, along with the monthly gains in April and May, suggests sales activity is finally moving in the right direction. However, the slow start to the year will make year-over-year comparisons a bit tough. June sales are down 2.3 percent from a year-earlier.
Inventories are also looking better. Listed inventories rose 2.2 percent to 2.3 million homes, which represents a 5.5-month supply. Inventory remains at a historically-low level, but has increased over the past four months, which is helping to boost overall sales activity.
Sales of homes below $100,000 remained weak on a year-ago basis, while all other price categories showed an increase. Soft sales in lower-priced homes likely reflect the low share of first-time home buyers. Although the proportion of sales attributed to first-time home buyers ticked up a notch to 28 percent of total sales in June, it is well below the long-run average of 40 percent. Without the first-time home buyer, the housing recovery is unlikely to gain any meaningful traction.
In fact, the housing market has been giving off mixed signals in recent months. Housing starts plummeted unexpectedly in June and mortgage applications for purchase have posted a string of weak readings. On the other hand, existing and new home sales are trending higher and builders are a bit more optimistic about sales conditions. Some of the disconnect in the weak trend in mortgage applications for purchase and improving sales activity can be explained by the still-elevated share of all-cash transactions. All-cash transactions were unchanged on the month at 32 percent and are one percentage point higher than a year earlier.
Another sign the housing market is improving, but still has quite a way to go, is the share of distressed transactions. Distressed sales now make up 11 percent of overall sales activity which is down from 15 percent a year earlier. Some of the decline in overall distressed transactions is due to fewer short sales, which comprised 7 percent of total sales last year and are down to 3 percent in June. The lower share of short sales is partly due to the rise in home prices, which helped many underwater borrowers obtain positive equity in their home. Another reason we are likely seeing a decline in the share of short sales is the expiration of the Mortgage Forgiveness Debt Relief Act, which exempted taxation on mortgage debt forgiven or cancelled by a lender through a short sale. If borrowers are waiting to see if the provision is extended, inventory levels could be further constrained.
Existing Sales Activity Shows Third Monthly Gain
Existing home sales rose 2.6 percent in June to a 5.04 million-unit pace, which was more than expected. The headline increased to its highest level since October 2013, when sales reached a 5.13 million-unit rate. June’s improvement, along with the monthly gains in April and May, suggests sales activity is finally moving in the right direction. However, the slow start to the year will make year-over-year comparisons a bit tough. June sales are down 2.3 percent from a year-earlier.
Inventories are also looking better. Listed inventories rose 2.2 percent to 2.3 million homes, which represents a 5.5-month supply. Inventory remains at a historically-low level, but has increased over the past four months, which is helping to boost overall sales activity.
Sales of homes below $100,000 remained weak on a year-ago basis, while all other price categories showed an increase. Soft sales in lower-priced homes likely reflect the low share of first-time home buyers. Although the proportion of sales attributed to first-time home buyers ticked up a notch to 28 percent of total sales in June, it is well below the long-run average of 40 percent. Without the first-time home buyer, the housing recovery is unlikely to gain any meaningful traction.
In fact, the housing market has been giving off mixed signals in recent months. Housing starts plummeted unexpectedly in June and mortgage applications for purchase have posted a string of weak readings. On the other hand, existing and new home sales are trending higher and builders are a bit more optimistic about sales conditions. Some of the disconnect in the weak trend in mortgage applications for purchase and improving sales activity can be explained by the still-elevated share of all-cash transactions. All-cash transactions were unchanged on the month at 32 percent and are one percentage point higher than a year earlier.
Another sign the housing market is improving, but still has quite a way to go, is the share of distressed transactions. Distressed sales now make up 11 percent of overall sales activity which is down from 15 percent a year earlier. Some of the decline in overall distressed transactions is due to fewer short sales, which comprised 7 percent of total sales last year and are down to 3 percent in June. The lower share of short sales is partly due to the rise in home prices, which helped many underwater borrowers obtain positive equity in their home. Another reason we are likely seeing a decline in the share of short sales is the expiration of the Mortgage Forgiveness Debt Relief Act, which exempted taxation on mortgage debt forgiven or cancelled by a lender through a short sale. If borrowers are waiting to see if the provision is extended, inventory levels could be further constrained.
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