Existing Home Sales in June 2018 Like a Slow Leaking Tire — Hard to Notice the Difference But the Dash Warning Light Just Illuminated

Existing home sale slipped 2.2 percent in June 2018 versus a year ago to 5.38 million sales on a seasonally adjusted annualized basis (SAAR) according to National Association of Realtors® (NAR).  Sales dipped 0.6 percent sequentially from May on a SAAR.  From an unadjusted basis, housing sales in the first six months totaled 2.631 million, down 2.23 percent from a year ago.  Sales in June 2018 tallied 570,000 compared to 600,000 a year ago, a drop of 5.0 percent.

Median price in June was $276.900, up 5.2 percent from a year ago, and the average price $314,900 — a 3.8 percent year-over-year gain.  The median and average prices for June 2018 are both all-time records.  Median price has now risen 76 consecutive months on a year-over-year basis.

The following graph shows the trend in housing sales based on a trailing 12-month basis (TTM), but with monthly median prices.  Sales have wobbled in the past year, with the downward trend picking up pace in past two months.

Sales and median prices are shown on a monthly basis in the following two graphs.  Sales have been up in two of the six months this year and down in four months compared to a year ago.  Median price, on the other hand, continued on an upward accent driven by minimal inventory of just 4.1 months with 6.0 months considered normal (contrasted to 3.9 months a year ago).  The inventory of available listings for sale increased to 1.95 million – up 0.5 percent versus a year ago.

The trend and corresponding seasonality in average prices are shown in the next graph.   The average price of $314,900 is a new all-time record.

Other metrics and insights from the June 2018 NAR release included:

  • 58 percent of the sales closed in June were on the market less than one month, with the typical property lasting just 26 days from listing to a having a signed purchase contract
  • First-time homebuyers were present in three-out-of-every 10 transactions (31 percent) — essentially unchanged from a year ago (32 percent)
  • Investors acquired  13 percent of all sales in June 2018, the same as a year ago
  • All-cash sales made up one-in-five closings (22 percent) in June 2018 compared to 18 percent a year ago
  • Distressed sale made up 3 percent of June’s closing, the lowest reported since NAR commenced tracking this metric in October 2008).  Foreclosures made up 2 percent and short sales 1 percent
  • Million dollar and up homes made up 3.8 percent of all sales in June 2018, smashing the previous high of 3.1 percent in May 2018, and only the second time in the 3 percent range

To read the entire NAR release click https://www.nar.realtor/newsroom/existing-home-sales-subside-06-percent-in-june

As stated last month in the Jones on Real Estate Blog:

Where the U.S. housing market goes will be a function of jobs, interest rates, prices, incomes and inventory.  The number of sales typically peak in June (the past four years) or July and August.  

 I do now believe that 2018 housing sales will be less than a year ago, but still strong.  People have to live someplace, and in the majority of markets buying makes more sense than renting.

 No doubt rising interest rates, increased home prices and expanding apartment construction are having an impact on sales, though slight at this time.  Price will come into play at some time as the average hourly income rate in the U.S. has increased just 2.7 percent in the past 12-months and 12.6 percent in the past five years while median price jumped 5.5 percent and 29.4 percent for the same time periods, respectively.  

The slow leak in the housing sales tire is still drivable at high speeds, but the warning light is on.  For now, housing demand remains fundamentally strong given the U.S. economy.

Ted

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