US existing home sales surged on pent-up demand in June after three straight declines, with the current month’s data reflecting contract signings after states began to reopen. National Association of Realtors Chief Economist Lawrence Yun said the market is “red hot,” particularly outside of urban areas as buyers are looking for larger homes in the suburbs that provide home offices and increased social distancing.
The move toward telework will likely outlive the COVID crisis, allowing buyers to move further away from their places of work.
Data released Wednesday by the NAR showed that overall existing home sales rose by a record 20.7% to a 4.72 million annual rate in June, slightly below expectations for a 4.80 million rate, after falling to a 3.91 million rate in May. Yun noted that the pace was consistently above 5 million before the COVID shutdown and June sales were still down 11.3% from a year earlier, so it will take a few more months to return to normal at the current rate of improvement – and that could happen. Yun said that he expects second-half sales this year could be stronger than the same period in 2019.
The weekly Mortgage Bankers Association data, released earlier on Wednesday, showed that weekly mortgage rates ticked up to 3.20% from a record low 3.19% rate in the previous week. Low rates continue to support mortgage applications for both new and existing homes, suggesting a further uptick in resales in the coming months.
Single-family home sales rose by 19.9%, while condo sales rose by 29.4%, but Yun noted that the share of sales from condos declined as homeowners’ preferences has shifted away from communal living. There were sales gains in all four regions of the country after declines in May. The one headwind could be a resurgence of COVID cases in the South and West, which could result in further tightening of social distancing regulations and raise uncertainty.
Inventory of homes for sales rose by 1.3% in June but was down 18.2% from its level a year ago. When combined with the sales surge, the month’s supply fell to 4.0 months from 4.8 months in May and 4.3 months a year ago.
Prior to the COVID shutdowns, the month’s supply dipped to 3.0 months in February. Yun said that sales could even stronger if there was adequate supply, as the time on market is an extremely low 24 days. The NAR said that 62% of homes were on the market less than a month in June. In short, homes are being snatched up almost a soon as they are put on the market, especially outside urban areas.
New home construction rose sharply in June, based on data released on last week, which should add to the supply of new homes for sale and allow current owners to trade up and put their existing homes on the market.
The median sales price of existing home rose by 4.1% in June to a record high $295,300. Prices were up 3.5% year/year. Yun said that prices could move even higher if demand remains this strong and supply is not increased drastically.