Existing home sales fell 1.8% m/m to 5.52 million (annualized) in June from 5.62 million in the month prior. The headline print surprised to the downside, as markets expected a more moderate pullback of only 0.9%.
The decline was concentrated in the single-family segment where transactions fell by 2.0% to 4.88 million. Sales in the smaller condo/co-op segment remained unchanged at 640 thousand.
Sales activity declined across most regions, rising only in the Midwest (+3.1%) while pulling back in the West (-0.8%), Northeast (-2.6%) and South (-4.7%).
The inventory of homes available for sale fell by a seasonally unadjusted 0.5% on the month and remained low at 1.96 million – down 7.1% from year-ago levels. At the current sales pace, inventory accounts for just 4.3 months’ worth of supply compared to 4.6 a year ago – well below the six months’ of sales considered a balanced market.
The low supply of homes available for sale is putting upward pressure on prices, with the median home price advancing by a robust 6.5% y/y in June – up from 5.7% in the month prior.
First-time homebuyers accounted for 32% of sales, which is down from 33% in the month prior and year-ago. Meanwhile, homes typically stayed on the market for 28 days – up from last month (27 days) but down from year-ago (34 days).
Key Implications
Today’s pullback in home sales is disappointing, but not entirely unwarranted given that contract signing (pending home sales) had declined for three consecutive months through May. On a trend basis, activity has plateaued around the still-elevated 5.6 million mark for the first half of the year, supported by lower mortgage rates since March.
The June data bring the second quarter to a close, with resale activity having declined 3.7% on an annualized basis. While we expect activity to improve in the coming quarters, the decline in June does make for a weak handoff into the third quarter.
One of the main factors holding back activity in recent months has been the low inventory of homes for sale. While we see no quick turnaround on this front, rising prices should encourage more homeowners to put their homes on the market. At the same time, increased homebuilding should also help alleviate some of the pressures via the new home market.
Overall, resale activity should manage to advance by around 3.4% this year as outlined in our recent report, supported by a healthy labor market.
