Sales of previously owned homes rose by 15.2% in June from one year ago to a seasonally adjusted annual rate of 5.08 million, but they were down by 1.2% from one month ago, according to the National Association of Realtors.
Monday’s report showed that the housing market may be slowly returning to equilibrium after a year in which demand has outstripped supply, pushing up prices. At the current pace of sales, there was a five-month supply of homes in June on a seasonally adjusted basis, up from the 4.9-month supply in May but down from the 6.1-month supply a year earlier.
Did higher interest rates have an impact on home sales? It’s probably too early to say. Mortgage rates began to rise during the last week of May, and many homes that sold in June went under contract in May — before rates really began to rise. Because many homes that went under contract in June — the first month of truly higher mortgage rates — won’t close until July, the full impact of the rate increase won’t be seen for another month.
Some 40% of economists polled by The Wall Street Journal this month said rising rates wouldn’t have a noticeable effect on sales. Around one-third of economists said rate increases would slow sales, and around one-quarter said it would slow home-price gains.
Will higher rates have an impact on prices? There are already anecdotal signs that higher rates are testing sellers’ ability to ask for higher prices, particularly in more expensive housing market, such as many parts of California, which have also witnessed big price gains. But the more important metric to watch on the home-price front is inventory. As tempting as it is to lay today’s report on rates, inventory still has been the bigger driver of price gains and the bigger curb on sales volumes.
What’s happening to inventory? Inventory is still very low, but it is slowly rising. The 2.19 million homes for sale in June rose by 1.9% from May but still stood 7.6% below last year’s levels. The year-over-year declines have been shrinking over the past few months.
For much of the past year, real-estate agents have bemoaned the fact that low listings have limited sales. Now, if inventory keeps rising, that hurdle should get lower. Still, inventory is still very low. Bill McBride at the CalculatedRisk blog offers an important primer on what to focus on in these monthly housing reports. The key number, he says, “is not sales, but inventory,” because it is the inventory number that influences prices.
Is the foreclosure picture improving? Unequivocally, yes. The drop in the share of homes selling out of foreclosure is a big reason reported price gains have come on so strong this year. But it also means there are fewer bargains to be scooped up by investors and traditional buyers. In California, for example, just 10% of homes sold in June had gone through foreclosure in the last year—down from a high of 58.8% in February 2009.
The NAR said its own member survey found that distressed sales accounted for 15% of sales in June, down from 18% in May and the lowest since the NAR began tracking this category in October 2008.
Are investors less interested in housing? A separate survey released Monday showed that investors’ share of home purchases dropped in June to 20% for all sales, down from 23% in February. Some of this, to be sure, is seasonal. Investors tend to account for a greater share of home purchases in the winter months, and a smaller share during the spring and summer season, when more traditional transactions take place.
Still, the survey, conducted by Campbell Surveys and Inside Mortgage Finance, raises the prospect that higher prices may thin out the ranks of investors, which have played a key role in clearing what was once an oversupply of homes. The share of homes purchased by first time buyers dropped to 35.7% of all homes, down slightly from 36%. Meanwhile, current homeowners accounted for 45% of sales in June, up from 44% in May.
Via Wall Street Journal