With tight supplies of affordable homes limiting first-time buyers, the National Association of Realtors released a report on Thursday showing an unexpected drop in existing home sales in the month of June.
NAR said existing home sales fell 5.4 percent to an annual rate of 4.37 million in June from an upwardly revised 4.62 million in May. The drop surprised economists, who had expected existing home sales to climb to 4.65 million from the 4.55 million originally reported for the previous month.
The unexpected drop pulled the annual rate of existing home sales down to the lowest level since October of 2011, when existing home sales came in at an annual rate of 4.32 million.
While existing home sales unexpectedly showed a notable decrease, Lawrence Yun, NAR chief economist, claimed the bigger story is lower inventory and a recovery in home prices.
"Despite the frictions related to obtaining mortgages, buyer interest remains solid," Yun said. "But inventory continues to shrink and that is limiting buying opportunities."
"This, in turn, is pushing up home prices in many markets," he added. "The price improvement also results from fewer distressed homes in the sales mix."
The report showed that total housing inventory fell 3.2 percent to 2.39 million existing homes available for sale at the end of June from 2.47 million at the end of May.
However, housing inventory now represents 6.6 months of supply at the current sales pace, up from 6.4 months of supply in May due to the slower rate of sales.
NAR noted that listed inventory is 24.4 percent below the same month a year ago, when there was 9.1 months of supply.
Additionally, the report said the national median existing-home price rose 5 percent to $189,400 in June from $180,300 in May. The median existing-home price is up by 7.9 percent compared to June of 2011.
The year-over-year growth in June was the strongest since February of 2006, when the median price was up by 8.7 percent compared to the prior year.
The unexpected drop in existing home sales in June reflected a 5.1 percent decrease in single-family home sales as well as a 7.8 percent drop in existing condominium and co-op sales.
The report also showed that existing home sales in the Northeast tumbled by 11.5 percent. Existing home sales in the West and South also fell by 6.9 percent and 4.4 percent, respectively, while existing home sales in the Midwest edged down by 1.9 percent.
Teunis Brosens, Senior Economist at ING Bank, said, "Despite today's somewhat disappointing sales figure, we remain of the view that the housing market has bottomed. The steadily dropping inventory and the sustained upward trend in new home sales support our view."
"That said, today's somewhat disappointing sales figure emphasizes that the recovery in housing will be a long and winding road," he added.
The National Association of Home Builders released a report earlier this week showing that homebuilder confidence jumped to a five-year high in July, while the Commerce Department released a separate report showing a bigger than expected increase in housing starts in June.
Next week, the Commerce Department is due to release a report on new home sales and NAR is due to release a report on pending home sales.
by RTT Staff Writer
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