In the face of higher interest rates and a sluggish economy, existing home sales in July were better than expected, hitting their best level in almost four years. The National Association of Realtors announced on Wednesday that total existing home sales, which are completed transactions including single-family homes, town-homes, condos, and co-ops, jumped 6.5 percent to a seasonally adjusted annual rate of 5.39 million units last month. In comparison, June showed a downwardly revised 5.06 million units.
Economists only expected a pace of about 5.15 million units. The surprise beat was a sharp turnaround from June, which posted the biggest miss in a year. Existing home sales are up 17.2 percent from the 4.60 million-unit level seen a year earlier. Sales are at their highest level since the tax credit period of November 2009, when sales spiked to 5.44 million units. Total sales have now been above year-ago levels for 25 consecutive months.
Lawrence Yun, NAR chief economist, cautions that rising mortgage rates will impact affordability. He explained that, “Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines. The initial rise in interest rates provided strong incentive for closing deals. However, further rate increases will diminish the pool of eligible buyers.”
Single-family home sales in July gained 6.3 percent to a seasonally adjusted annual rate of 4.76 million units compared to 4.48 million units in June. On a regional basis, existing-home sales in the South increased 5 percent, while the Midwest posted a gain of 5.8 percent. Sales jumped 6.6 percent in the West and surged 12.7 percent in the Northeast.
Low inventory levels continue to support home prices. The national median existing home price for all housing types was $213,500 in July, compared to a year earlier. This is the 17th consecutive month of year-over-year price gains. The last time this occurred was from January 2005 to May 2006, during the housing bubble.
Total housing inventory at the end of July rose 5.6 percent to 2.28 million existing homes available for sale, representing a 5.1-month supply. Compared to last year, listed inventory is down 5 percent when there was a 6.3-month supply.
Amid tight lending standards and a lack of credit worthy borrowers, all-cash sales comprised 31 percent of transactions in July. “The overall percentage of cash purchases has been fairly steady, as has the share of first-time buyers, but the investor share has been trending down since February, said Gary Thomas, NAR president. “This means more repeat buyers are using cash in this tight-credit environment,” he said. “With a steady decline in lower priced inventory, particularly in foreclosures, investors are finding fewer bargains to buy.”
Shares of Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) both traded higher on Wednesday, despite weakness in the overall stock market. Lowe’s announced better-than-expected quarterly results as earnings surged 26 percent from a year earlier. Shares of home builders PulteGroup (NYSE:PHM) and Toll Brothers (NYSE:TOL) also increased 1 percent and 2 percent, respectively.
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