The days are a little shorter, the nights a bit cooler, and many kids across the country have already been sent back to school or are soon to be. Now is a good time to look back on how Spring and Summer home sales have fared thus far.
Based on the latest report, existing–home sales decreased 1.3% from the previous month to on a seasonally adjusted annual rate of 5.4 million in July, the lowest rate so far this year. Meanwhile, new home sales declined 9% last month to a seasonally adjusted annual rate of 571,000 units.
Monthly sales estimates can be noisy, so it's often more informative to look at year–to–date totals. Summing the first seven months of the year Existing home sales are up 2.1% from last year, and total home sales are up 0.9% since last year, putting us on track for the best year in total home sales since 2007.
Will the recent slowdown continue, or will home sales regain momentum in the coming months?
Mortgage rates are very favorable right now, and our forecast is for them to stay around 4 percent for the 30–year fixed–rate mortgage (by far the most popular mortgage product with borrowers today) by year end. Job gains have been solid and our forecast if for job growth to remain robust the rest of this year, supporting homebuyer demand in the fall and winter.
The real challenge would–be homebuyers face is this — they can't buy what isn't for sale. Currently, the industry faces a serious supply vs demand imbalance — we're currently at a 4.2–month supply for existing homes and a 5.8–month supply for new homes nationally. Unfortunately, this lack of supply of for–sale homes is even tighter in many markets across the country, and especially at a price point that's affordable for first–time homebuyers. New home construction is grinding higher, gradually brining more supply onto the market, but only slowly.
While home sales may start to cool, house prices are likely to stay hotter than normal because of the lack of supply.