U.S. Existing-Home Sales Unexpectedly Fall to Two-Year Low

(Bloomberg) -- Sales of previously owned U.S. homes unexpectedly dropped for a fourth month to the weakest in more than two years, signaling higher prices and tight supplies continue to squeeze demand, a National Association of Realtors report showed Wednesday.

Highlights of Existing-Home Sales (July)

  • Contract closings fell 0.7% m/m to a 5.34m annual rate (est. 5.4m), the slowest pace since Feb. 2016, after unrevised 5.38m
  • Median sales price increased 4.5% y/y to $269,600
  • Inventory of available properties unchanged y/y at 1.92m

Key Takeaways

The report adds to other recent signs of cooling in real estate markets. Prospective home buyers are increasingly discouraged by rising borrowing costs and property-price increases that are outpacing wage growth. The share of Americans who say it’s a good time to buy a home fell in August to 63 percent, the smallest since 2008, the University of Michigan consumer sentiment survey showed on Friday.

U.S. Existing-Home Sales Unexpectedly Fall to Two-Year Low

Continuing declines in purchases of single-family homes and cheaper properties suggest that the market is being supported by an increasing concentration of activity among those with higher income and financial assets.

The slump was led by an 8.3 percent decline in the Northeast, while the South and Midwest also decreased. Sales rose in the West.

Other parts of the U.S. housing market are showing signs of strength. Toll Brothers Inc., the country’s biggest builder of luxury homes, on Tuesday reported rising orders, revenue and backlog, indicating wealthy buyers are feeling confident enough to make purchases. In fact, NAR said properties priced above $1 million accounted for 3.7 percent of single-family home sales in July, up from 2.7 percent a year earlier.

Official’s Views

The decline in sales “has been a slow drip, and the housing market is the same story, where we’re lacking inventory,” Lawrence Yun, NAR’s chief economist, said at a press briefing accompanying the report.

Other Details

  • At the current pace, it would take 4.3 months to sell the homes on the market, unchanged from the prior month; Realtors group considers less than five months’ supply consistent with a tight market
  • Single-family home sales fell 0.2 percent to annual rate of 4.75 million
  • Purchases of condominium and co-op units dropped 4.8 percent to a 590,000 pace
  • First-time buyers made up 32 percent of all sales, compared with 31 percent in prior month
  • Homes were on the market for an average 27 days, compared with 26 days in June
  • 55 percent of homes sold in July were on market for less than a month, NAR said
  • Existing home sales account for 90 percent of the market and are calculated when a contract closes; new home sales, considered a timelier indicator though their share is only about 10 percent, are tabulated when contracts get signed

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