The wind down to the end of the second quarter is not going very well. Existing home sales in June fell 1.8% to a seasonally adjusted annualized rate of 5.52 million. The Econoday consensus estimate was 5.58 million.
The slip in pending home sales was no false signal as existing home sales fell 1.8 percent in June to a lower-than-expected annualized rate of 5.520 million. Year-on-year, sales are still in the plus column but not by much, at 0.7 percent which is the lowest reading since February.
Compared to sales, prices are rich with the median of $263,800 up 6.5 percent from a year ago. Another negative for sales is supply which fell 0.5 percent in the month to 1.96 million for an on-year decline of 7.1 percent. Relative to sales, supply is at 4.3 months vs 4.2 months in May.
High prices appear to be keeping first-time buyers out of the market with the group representing 32 percent of sales vs 33 percent in May and 35 percent for all of last year.
Rising prices and thin supply, not to mention low wages, are offsetting favorable mortgage rates and holding down sales. Housing data have been up and down and unable to find convincing traction so far this year. Watch for new home sales on Wednesday where general strength is the expectation.
Existing Homes Sales Month-Over-Month and Year-Over-Year
Same Old Problem?
Mortgage News Daily says Existing Home Sales Weakness Blamed on Same Old Problem.
Existing home sales slipped in June, with the blame again placed on low levels of inventory. The decline in sales, announced on Monday by the National Association of Realtors® (NAR), was anticipated, as pending home sales have decreased in each of the previous three months, ticking down 0.8 percent in May.
NAR said sales of existing single-family houses, townhouses, condos and cooperative apartments were down 1.8 percent in June, to a seasonally adjusted annual rate of 5.52 million units, the second slowest performance of the year.
Lawrence Yun, NAR chief economist, says the pullback in existing home sales in June reflected the lull in contract activity in March, April, and May. “Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget,” he said. “The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”
The median existing-home price for all housing types in June was $263,800, up 6.5 percent from June 2016 ($247,600). This is a new peak price, surpassing the record set in May. June marked the 64th straight month of year-over-year gains.
The median existing single-family home price was $266,200 in June and the median existing condo price was $245,900. Those prices reflected annual increases of 6.6 percent and 6.5 percent respectively.
The tight supply of homes continues to be reflected in short marketing period. Properties typically stayed on the market for 28 days in June, one day more than in May, but six days fewer than in June 2016. Short sales were on the market the longest at a median of 102 days in June, while foreclosures sold in 57 days and non-distressed homes took 27 days. Fifty-four percent of homes sold in June were on the market for less than a month.
“Prospective buyers who postponed their home search this spring because of limited inventory may have better luck as the summer winds down,” said NAR President William E. Brown. “The pool of buyers this time of year typically begins to shrink as households with children have likely closed on a home before school starts. Inventory remains extremely tight, but patience may pay off in coming months for those looking to buy.”
First-time buyers accounted for 32 percent of existing home sales in June, down from 33 percent the previous month and a year earlier, while individual investors purchased 13 percent, unchanged from a year ago.
Convoluted Logic
Supposedly buyers may have better luck because the pool of buyers is shrinking as summer winds down. Really? By that logic, if there was only one person looking there would be a 100% success rate.
Yun says “The demand for buying a home is as strong as it has been since before the Great Recession.”
Really? By what measure?
Attitudes and Price
This is not a case of inventory or strong unmet demand. Here are the real factors.
- The Fed re-blew the housing bubble and wages did not keep up. People cannot afford the going prices. Thus, the number of first-time buyers keeps shrinking.
- Millenials do not have the same attitudes towards debt, housing, and family formations as their parents.
- Millenials are unwilling to spend money they do not have, for a place that will keep them tied down. They would rather be mobile.
Second and Third Quarter Impact
The decline in existing home purchases portends weakness in consumer spending.
There will be fewer people painting, buying furniture, updating appliances, remodeling kitchens, adding landscaping etc. The pass through effect will be greatest in the third quarter unless there is a rebound.
Mike “Mish” Shedlock
I’m amazed that the numbers are as good as reported. Many, many people have been priced out of the market, or are gambling with very low down payments, mortgage insurance, and spending an enormous percentage of their incomes on housing. Won’t end well…
“Those prices reflected annual increases of 6.6 percent and 6.5 percent respectively.”
…
“Experts” cheer this news … yet never seem to want to talk about affordability (in large measure due to wages / salary stuck in low gear) at these prices.
10% of home purchases by foreigners (dollar wise), primarily Chinese, Canadian, UK and Mexican.US homes are cheap compared to China, Canada and the UK. I’m not sure about Mexico.
You are spot on, Mish, with your points # 2 and # 3 in Attitudes and Price. My youngest daughter graduated Magna Cum Laude with dual majors in Math and Computer Science in 2012 and lives in LaJolla, CA where she is now at age 26 the lead programmer for a Pharma Company. She leases a car because she doesn’t want to own a depreciating asset. She rents, naturally, because LaJolla is outrageous, and pays $ 2,500 a month for a 900 sq ft apartment She’s single, has no debt, and saves as much as she can. She is very proud of the fact that she is mobile, can work at a company location or detached virtually anywhere and that she has built her career, which includes being the youngest person to present a drug to the FDA for approval, and has open offers if she decides she wants to go somewhere else or join another Pharma. Her outlook is so totally different than mine at her age when I was in Germany, married, as an Army Captain back from Vietnam, living month to month.
That’s a dumb reason. Does she lease all of her clothes, too?
She sounds like she is good with her money otherwise, but leasing a car is not a wise choice. She is guaranteeing herself perpetual car payments – if she wants to change cars every two or three years then that is one thing, but it still is not as wise as keeping the same car for 8-10 years.
If one has the time, skills, aptitude and interest in keeping a car up to day post warranty, you are likely right. But a 26 yo woman with a busy job in a professional field far removed from the auto industry???
Strictly speaking, it is also cheaper to keep your shirts 8-10 years, just patching them as they wear out. But unless one is one heck of a sowing wiz, I’m not sure how wise that choice is for someone in a professional capacity, who needs to wear them for work.
“which includes being the youngest person to present a drug to the FDA for approval”
Not correct, when I was 24 I went to get travel documents for my dog, and accidentally passed a bag with weed in it through the FDA security check at their headquarters in Silver Spring, MD. So technically I have her beat by two years.
Also, please stop suggesting someone can be successful strictly due to hard work and intelligence.
I’ll leave the Cum Laude alone… too easy..
If she’s a programmer, why is she presenting a drug to the FDA? Seems odd that would be part of her job? Also, what does presenting a drug mean? Didn’t the drug have to go through years of clinical trials? Which I assume must have begun long before she started working there.
I am interpreting Mish’s posting as Mish doesn’t believe that “Existing home sales slipped in June, with the blame again placed on low levels of inventory.” Right?
I said what I said.
This is not a case of inventory or strong unmet demand. Here are the real factors.
1. The Fed re-blew the housing bubble and wages did not keep up. People cannot afford the going prices. Thus, the number of first-time buyers keeps shrinking.
2. Millenials do not have the same attitudes towards debt, housing, and family formations as their parents.
3. Millenials are unwilling to spend money they do not have, for a place that will keep them tied down. They would rather be mobile.
“People cannot afford the going prices. Thus, the number of first-time buyers keeps shrinking.”
…
Yes. In my locale – starting in 2010 and lasting for years – ALL CASH investors scooped up everything @ $200K and under. Made the numbers coming out of the recession look OK, but now they are still sitting on those homes … or trying to sell them at much inflated prices. Out of reach of current first time buyers … AND without those earlier first time buyers (who got locked out of buying coming out of the recession) who might be looking to move up now once they’ve built some equity? The move up market feeling the pain, as well.
Much has to do with flipping. There seems to be a correlation between shortages in areas where prices are rising fastest and flipping is most rampant. There may be a shortage of houses for sale but I bet many of the bought houses are empty and are just a speculative shell
That many people intent on flipping means “bubble – about to burst.”
Investors buying up all inventory…….what could possibly go wrong.
When rent falls due to oversupply its going to be a blood bath for these investors.
Not to worry,,,,section 8 subsidized rents are unlikely to fall, holding a floor under rents for investors.
Besides, falling rents being connotative of deflation, it’s hard to imagine HUD contributing to the “D” word by lowering them. I mean, price supports being so cherished by TPTB and all?
We are probably about an order of magnitude away from any realistic “oversupply” in the housing stock. So, absent Black Death part deux or some such, the chances of us getting there anytime soon is rather slim.
A slight reduction in the artificially mandated shortages, may still lower rents a bit, though.
“People cannot afford the going prices.”
???
Well, then, how are they considered “Going” prices?
Because people are waiting for those prices to be gone ?
Millennials also like having perpetual two-year mortgages on their cell phones.
I’ve financed many cell phones simply because they’re no interest loans. Once they’re paid off, they’re yours.
“Millenials are unwilling to spend money they don’t have.”…Who among them is willing to purchase a home, when one can have the “experience” of borrowing 120K
to graduate with an undergrad degree in Gender Studies…
Reblogged this on World4Justice : NOW! Lobby Forum..
yes When rent falls due to oversupply its going to be a blood bath for these investors