Sales of single-family homes, townhomes, condominiums, and co-ops, increased 6.5% in July and are 17.2% above the sales pace set in July 2012. Home sales have been above year-ago levels for the past 25 months, but changes in affordability have begun to influence the real estate market, said NAR Chief Economist Lawrence Yun.
“Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines,” he said. “The initial rise in interest rates provided strong incentive for closing deals. However, further rate increases will diminish the pool of eligible buyers.”
Despite higher mortgage interest rates, Yun identified compensating factors that can sustain a continued recovery. “Although housing affordability conditions will become less attractive, jobs are being added to the economy, and mortgage underwriting standards should normalize over time from current stringent conditions as default rates fall.”
The national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.37% in July from 4.07% in June, and is the highest since July 2011 when it was 4.55%, according to Freddie Mac; the rate was 3.55% in July 2012.
Total housing inventory at the end of July rose 5.6% to 2.28 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace, unchanged from June. Listed inventory is 5% below a year ago, when there was a 6.3-month supply. “Tight inventory in many areas means above-normal price growth for the foreseeable future,” Yun said.
Median Home Price Up 13.7%
The national median existing-home price for all housing types was $213,500 in July, up 13.7% above July 2012. This marks 17 consecutive months of year-over-year price increases, which last occurred from January 2005 to May 2006.
The median price has risen at double-digit rates for the past eight months, and is now 7.3% below the all-time record of $230,400 in July 2006. Two years ago, the median price was 25.7% below the peak.
Foreclosures and Short Sales
Distressed homes — foreclosures and short sales — accounted for 15% of July sales, the same as in June and matching the lowest share since monthly tracking began in October 2008. A year ago, 24% of sales were distressed properties.
Fewer distressed sales have contributed to rising prices because distressed homes typically sell at a discounted price. Foreclosures sold for an average discount of 16% below market value in July, while short sales were discounted 12%.
The median time on market for all homes was 42 days in July, up from 37 days in June, but that’s still 39% faster than the 69 days on market in July 2012. Short sales were on the market for a median of 72 days, while foreclosures typically sold in 50 days, and non-distressed homes took 40 days. Forty-five percent of homes sold in July were on the market for less than a month.
Data from realtor.com®, NAR’s listing site, shows the tightest inventory conditions, reported as median age of inventory, are in:
- Oakland, Calif., 20 days
- Denver, 31 days
- Seattle area, 36 days
First-time buyers accounted for 29% of purchases in July, unchanged from June, but that’s down from 34% in July 2012.
All-cash sales comprised 31% of transactions in July, the same as in June; they were 27% in July 2012. Individual investors, who account for many cash sales, purchased 16% of homes in July, down from 17% in June. Investor home purchases peaked at 22% in February of this year.
More repeat buyers are using cash, said NAR President Gary Thomas. “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. 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.”
What Kinds of Homes are Selling?
- Single-family home sales rose 6.3% in July and are 16.4% higher than July 2012.
- Median existing single-family home price: $214,000 in July, up 13.5% from a year ago.
- Existing condominium and co-op sales increased 8.6% in July and are 23.5% above the year-ago pace.
- Median existing condo price: $209,600 in July, which is 15.5% higher than July 2012.