July saw a second straight month of existing-home sales growth, with completed transactions up 2.0% from June to hit a seasonally adjusted annual rate of 5.99 million units.
That’s according to the National Association of Realtors (NAR), which also noted that sales ticked up annually, growing 1.5% from the same month one year prior.
“We see inventory beginning to tick up, which will lessen the intensity of multiple offers,” said Lawrence Yun, NAR’s chief economist. Total housing inventory at the end of July was at 1.32 million units, up 7.3% from June, though still down 12.0% from July 2020. Unsold inventory sits at a 2.6-month supply at the current sales pace, a slight improvement from June’s 2.5-month level and down from 3.1 months one year ago.
The market, it appears, is on its way to some impression of balance, though as Yun observed, its entry-level price ranges are still suffering from lack of supply.
“Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available,” Yun said.
“Amidst the ongoing supply and affordability challenges, there was a slight decline in the share of first time-homebuyers to 30% (from 31%) of sales,” added Joel Kan, associate vice president of economic and industry forecasting with the Mortgage Bankers Association. “With median sales prices remaining close to record highs, there are prospective buyers who are priced out, and first-time buyers tend to be particularly sensitive to these elevated prices. They are also competing with an elevated share of cash buyers – up to 23% of all buyers compared to 16% a year ago.”
The bump in cash buyers likely reflects buyers trying to gain a competitive edge in a market where homes continue to sell rapidly. Properties typically stayed on the market for just 17 days in July, unchanged month over month and down from 22 days in July 2020. Eighty-nine percent of homes sold in July were on the market for less than a month. Competition appears to be easing somewhat, according to Redfin, though it looks like buyers are continuing to pull out as many stops as possible to get into prime position for home purchases.
The modest improvement in inventory has helped moderate prices somewhat, with the median sales price slightly decreasing to $359,900, down 0.8% from June. Prices remain 17.8% higher than they did in July 2021, but that year-over-year gain is down from a peak of 23.6% seen in May.
“Although we shouldn’t expect to see home prices drop in the coming months, there is a chance that they will level off as inventory continues to gradually improve,” said Yun.
“In the meantime,” he added, “some prospective buyers who are priced out are raising the demand for rental homes and thereby pushing up the rental rates.”