Due to increasing demand and limited supply of homes, the national median sales price of homes has reached a new record high. Additionally, existing-home sales increased in June to their highest pace in over eight years, according to a report from the National Association of Realtors (NAR) released Wednesday.
According to the NAR report, the median existing-home price for all housing types in June was $236,400, marking the 40th consecutive month of year-over-year gains. This is 6.5 percent above June 2014 and surpasses the $230,400 peak median sales price set in July 2006.
Total housing inventory at the end of June increased 0.9 percent to 2.30 million existing homes available for sale, an increased 0.4 percent from 2.29 million a year ago, NAR reports. Unsold inventory is at a 5.0-month supply at the current sales pace, down from 5.1 months in May.
"Limited inventory amidst strong demand continues to push home prices higher, leading to declining affordability for prospective buyers," said Lawrence Yun, NAR's chief economist. "Local officials in recent years have rightly authorized permits for new apartment construction, but more needs to be done for condominiums and single-family homes."
Trulia's Chief Economist Selma Hepp said in a statement that inventory level are still lagging as June’s inventory figures only increased just slightly and are down from last year. At the current pace, inventory would be absorbed in 5.0 months, she adds.
"Inventory continues to pose the biggest constraint to some areas, particularly in the West where the increase in sales was relatively weaker than in the Midwest and Northwest, but price growth was the strongest at almost 10 percent on an annual basis," Hepp said. "Strong home price growth in the West simply reflects incredible job market opportunities and market competition. Going forward, the lack of inventory may hold some of the sales growth."
Total existing-home sales, which include single-family homes, townhomes, condominiums, and co-ops, increased 3.2 percent to a seasonally adjusted annual rate of 5.49 million in June from a downwardly revised 5.32 million in May, according to the report. This will make nine consecutive months of year-over-year increases, and sales are 9.6 percent above a year ago at 5.01 million.
"Backed by June's solid gain in closings, this year's spring buying season has been the strongest since the downturn," Yun said. "Buyers have come back in force, leading to the strongest past two months in sales since early 2007," he said. "This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that's giving more households the financial wherewithal and incentive to buy."
Sales are now at their highest level compared to the 5.79 million total in February 2007. All major regions experienced sales gains in June and have now risen above year-over-year levels for six consecutive months.
"June sales were also likely propelled by the spring's initial phase of rising mortgage rates, which usually prods some prospective buyers to buy now rather than wait until later when borrowing costs could be higher," Yun said.
NAR also reported that single-family home sales increased 2.8 percent to a seasonally adjusted annual rate of 4.84 million in June from 4.71 million in May, and are now 9.8 percent above the 4.41 million pace a year ago. The median existing single-family home price was $237,700 in June, up 6.6 percent from June 2014 and surpassing the peak median sales price set in July 2006 at $230,900.
"The demand for buying has really heated up this summer, leading to multiple bidders and homes selling at or above asking price," he said. "Furthermore, tight inventory conditions are being exacerbated by the fact that some homeowners are hesitant to sell because they're not optimistic they'll have adequate time to find an affordable property to move into."
Realtor.com's Chief Economist Jonathan Smoke said in a statement that the NAR data has exceeded investor driven, strong activity recorded in 2013. He also notes that this is the largest and healthiest year for existing home sales since 2006.
"The increase in sales we’re seeing is consistent with the strong and growing demand we’ve been monitoring all year and we anticipate sales will increase as the summer progresses particularly with our expectations of growing millennial participation in the housing market," said, Realtor.com's chief economist. "Dragging this momentum is continued relative tight supply. Whereas inventory increased for the fourth straight month to 2.3 million units and this higher level of supply is enabling more sales, it’s not enough to dramatically change the months of supply, now at five months. Marking the 34th straight month of supply under six months, real relief from supply pressure has to come from new construction. Further, with relatively tight supply, the year over year price appreciation is now at 6.5 percent, still well above normal. This also follows what we’ve seen with year-over-year list prices moderating over the last three months but still high at six percent in June."
Pro Teck Valuation Services' Home Value Forecast (HVF) July update examined months of remaining housing inventory (MRI), finding that in the 200 U.S. housing markets it tracks the MRI average is 6.11, a decrease of more than 12 percent from the same time last year.
"Home Value Forecast believes all real estate is local and that national numbers mean little when you are buying or selling in a particular market," said Tom O'Grady, CEO of Pro Teck Valuation Services. "Although the national trend seems promising, it's important to evaluate fundamentals at the metro level."