Existing home sales slipped more than expected in June as high demand for homes combined with a shortage of available homes to propel prices to record highs.
The National Association of Realtors reported Monday that existing home sales fell 1.8% to a seasonally adjusted annual rate of 5.52 million units last month. The number was 5.62 million units in May; observers had anticipated that number would decline to 5.58 million units in June.
As supply has gone down, demand has risen. The supply of available homes was down 7.1% compared to this time last year, prompting bidding wars that have led to increases in housing prices that have exceeded wage gains.
The median sales price for an existing home was up more than 6% in June to $263,800.
A recent National Association of Realtors survey suggests part of the increase in demand in the year ended in March was sparked by foreign buyers.
"Foreign buyers and recent immigrants bought $153 billion worth of residential property in the year that ended in March, up close to 50%," wrote Kathryn Brenzel for The Real Deal. "Canadians were responsible for $19 billion of that total, the report found."
The Midwest was the only U.S. region to report an increase in sales (3.1%). In the South, existing home sales were down 4.7%; they were down 2.6% in the Northeast. The decline was less than 1% (0.8%) in the West.
"The fact that demand is so high is actually a good sign of economic health," Dr. Svenja Gudell, chief economist at Zillow (Z, Financial)(ZG, Financial), said. "But that's probably small comfort to buyers, especially first-time buyers that are having an especially difficult time finding entry-level homes for sale."
Emile L'Eplattenier, real estate analyst for New York-based FitSmallBusiness.com, offered this assessment of the situation.
"It's surprising to me that most pundits are talking about wage stagnation and other market factors,” L’Eplattenier said, “but are neglecting another important force that's keeping inventory low and prices high. Massive REITs are taking a bigger position in single-family rentals. For example, Blackstone Group's (BX, Financial) Invitation Homes raised $1.54 billion in an IPO in February. Many smaller investors are following in the footsteps of giants like Invitation. It may not have a massive effect on the market, but it can affect months of supply and days on market as investors close in days instead of months. “
