First-time home buyers looking for the white picket fence will have a better chance of seeing one in their parents’ backyard. Sales of both existing and newly built homes unexpectedly fell in July; one of the culprits, home prices were higher virtually across the board. Most notably though, the biggest price gains were at the low end where demand is highest.
Even the National Association of Realtors concedes that, “there is virtually no inventory on the lower end.” Not surprisingly, housing affordability is now at its lowest level since 2008.
Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums, and co-ops fell 1.3% to a seasonally adjusted annual rate of 5.44 million in July from a downwardly revised 5.51 million in June. July’s sales pace is still 2.1% above July 2016, but is the lowest of 2017.
The median price of all homes sold in July hit $258,300; a 6.2% increase over July 2016 ($243,200) and the highest July price on record. This also marks the 65th consecutive month of year-over-year gains.
In their monthly report, the National Association of Realtors divide their sales figures into six different price categories. Sales in the range of $100,000 or less were down 14%, while sales for homes priced $100,000 to $240,000 were off 2.7%.
The biggest increase in home sales came from those listed at more than $1.0 million or more, jumping nearly 20%. Sales of homes in the $750,000-to-$1.0-million range were up 14.2%, while homes in the $500,000-to-$750,000 price range were up 12.5%.
As a sign of things to come for those hoping to get on the property ladder, at the start of 2013, when the U.S. housing market was just beginning to gain traction, shares of homes sold above $500,000 were just nine percent of all sales. Today, those homes account for more than 14% of all sales.
The share of lowest-priced homes today is less than half of what it was in 2013.
“On the lower end, there is virtually no property at a very low price level anymore,” said Lawrence Yun, chief economist for the National Association of Realtors. “The same property has been moved up to a different price bucket just because the prices have been rising strongly, over 40 percent price appreciation in the past five years. We are not getting the transactions on the lower end because there is virtually no inventory on the lower end.”
In July 2017, first-time home buyers, which serve as a benchmark for how well the U.S. economy is doing, accounted for just 33% of all purchases; up slightly from 32% in both June 2017 and July 2016. The 30-year average–and a number that economists consider healthy–is 40%.
All-cash sales, which isn’t what one thinks of when they see first-time home buyers, accounted for 19% of all transactions in July, that’s up from 17% in June.
Individual investors, who account for many cash sales, purchased 13% of homes in July, unchanged from June and up from 11% a year ago.
Distressed sales(foreclosures and short sales) made up five percent of sales in July, up from four percent in June and unchanged from July 2016.
Home prices are now advancing and overheating in several major markets where supply is lowest. Inventory was down nine percent year-over-year in July. Even though mortgage rates are still near record lows, the National Association of Realtors’ Housing Affordability Index fell to its lowest level since 2008.
“Existing-Home Sales Slide 1.3 Percent in July,” National Association of Realtors, last accessed August 24, 2017.
“Supplementary Market Data,” National Association of Realtors, last accessed August 24, 2017.
“Housing Affordability Index,” National Association of Realtors, last accessed August 24, 2017.