The pace of existing home sales reached a nine month high in June, topping 5 million units for the first time since last October while there were reports of continued but moderating home prices from both the Federal Housing Finance Agency (FHFA) and the National Association of Realtors® (NAR). 

NAR reports that sales of existing single-family homes, condos, cooperative apartments, and townhomes were at an annual rate of 5.04 billion, up 2.6 percent from the adjusted May pace of 4.91 million.  The previous high in October 2013 was 5.13 million.  June sales however remained below the 5.16 million pace established in June 2013.  May sales number were a revision from the 4.89 million originally reported.

Lawrence Yun, NAR chief economist, said housing fundamentals are moving in the right direction. “Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices,” he said. “On the contrary, new home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages – particularly in the West – are still putting upward pressure on prices.”

Sales of single family homes were at a rate of 4.43 million in June compared to 4.32 million in May and 4.56 million one year earlier.  These represent changes of +2.5 percent and -2.9 percent respectively.  Existing condominium and co-op sales increased 3.4 percent to a seasonally adjusted annual rate of 610,000 units compared to 590,000 the previous month and are 1.7 percent higher than the 600,000 unit pace in June 2013.

Yun also noted that stagnant wage growth is holding back what should be a stronger pace of sales. “Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month,” he said. “However, the lack of wage increases is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability.”

There was a 2.2 percent gain in the total housing inventory compared to May with 2.30 million existing homes for sale at the end of the period, a 5.5 month supply at the current absorption rate.  Unsold inventory is 6.5 percent higher than a year ago when there were 2.16 million existing homes available for sale.

The median existing-home price for all housing types in June was $223,300, which is 4.3 percent above June 2013 and marks the 28th consecutive month of year-over-year price gains.  Existing single family homes rose 4.5 percent on an annual basis to a median of $224,300 and condos were up 3.2 percent to $215,700.

The share of existing home sales attributed to the distressed home sector continued to shrink, from 15 percent in June 2013 to 11 percent.  Three percent of existing homes sales were short sales that sold at an average discount from market value of 11 percent and 8 percent were foreclosures, sold at an average discount of 20 percent.

The share of sales to first-time buyers continues to underperform historically, rising slightly to 28 percent in June from 27 percent in May, but remain at an overall average of 28 percent over the past year.  Sixteen percent of sales were to investors, unchanged from May and one percentage point lower than a year ago and 69 percent of investors paid cash.  All cash sales continue to consistently represent just slightly less than a third of existing home transactions.

NAR President Steve Brown said Realtors® are reporting that some prospective buyers who have above average credit scores but low down payments are discouraged from purchasing by the high cost of FHA mortgage insurance. “Access to affordable credit continues to hamper young, prospective first-time buyers,” he said.   “NAR recommends that FHA reduce high annual mortgage insurance premiums for all qualified homebuyers and eliminate the insurance requirement for the life of the loan.”

The marketing period in June was 44 days compared to 47 in May and 37 a year earlier.  Short sales took a median of 120 days while foreclosures sold in 54 days and non-distressed homes in 32 days.  NAR said the decline in time-on-the-market over the last six months highlights that inventory is still not keeping pace with demand. Forty-two percent of homes sold in June were on the market for less than a month.

Regionally, existing-home sales in the Northeast rose 3.2 percent to an annual rate of 640,000 in June, but are 3.0 percent below a year ago. The median price in the Northeast was $269,800, slightly below (0.1 percent) June 2013. 

In the Midwest, existing-home sales jumped 6.2 percent to an annual rate of 1.20 million in June, but remain 2.4 percent below June 2013. The median price in the Midwest was $177,900, up 4.6 percent from a year ago.

Existing-home sales in the South inched 0.5 percent higher to an annual level of 2.06 million in June, and are up 1.0 percent from June 2013. The median price in the South was $192,600, up 3.4 percent from a year ago.

Existing-home sales in the West rose 2.7 percent to an annual rate of 1.14 million in June, but remain 7.3 percent below a year ago. The median price in the West was $301,000, which is 7.2 percent above June 2013.

Also out are the FHFA Home Price Index (HPI) numbers for May.  The index, based on repeat sales data from the government sponsored enterprises Freddie Mac and Fannie Mae, was up 0.4 percent compared to April while April’s numbers were revised upward from “no change” compared to March to an increase of 0.1 percent.

On an annual basis the May HPI was up 5.5 percent.  The index has now recovered to within 6.5 percent of its peak in April 2007 and is now at roughly the same level as in July 2005.

All of the nine census divisions posted positive annual increases ranging from 2.5 percent in the Middle Atlantic to 9.6 percent in the Pacific division.  The Mountain region increased 8.4 percent over the preceding months and three divisions had increases of slightly over 5 percent. 

Changes from April to May ranged from -0.7 percent in the East South Central division to 1.1 percent in the West South Central region.