More homeowners opted to sell their homes in June, bringing balance to real estate markets across the country, according to data from the NATIONAL ASSOCIATION OF REALTORS®.
There were 2.3 million existing homes for sale at the end of June. That’s a 5.5-month supply given the rate at which homes are now selling. A 6-month supply is considered a balanced market — one that doesn’t favor sellers or buyers.
Housing markets are moving in the right direction, says NAR chief economist Lawrence Yun. “Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country,” says Yun. “This bodes well for rising home sales in the upcoming months as consumers are provided with more choices.”
However, new home construction needs to rise by at least 50% for a complete return to a balanced market. Supply shortages — particularly in the West — are still putting upward pressure on prices, adds Yun.
Yun blames stagnant wage growth for holding back what should be a stronger pace of sales. “Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month,” he says. “However, the lack of wage increases is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates.”
In June, the median single-family existing-home price was $224,300, up 4.5% from June 2013.
The median existing-condo price was $215,700, up 3.2% from a year ago.
Compared to last June’s market, this year’s market also has a smaller proportion of home sales involving distressed sellers (foreclosures or short sales). About 11% of the homes sold in June were distressed sales, compared to 15% in June 2013. Only 8% of June 2014 sales were foreclosures and 3% were short sales.
Distressed sales influence real estate values because they generally sell for less than non-distressed homes. Foreclosures sold for an average of 20% below market value in June, while short sales were discounted 11%.
Who’s Buying Homes?
A larger-than-usual proportion of first-time homebuyers continued sitting on the sidelines in June, representing only 28% of buyers nationally. First-time homebuyers, most of whom use mortgages to buy their homes, have a hard time competing in bidding wars with all-cash buyers.
All-cash sales in June were 32% of transactions, up from 31% in June 2013.
NAR President Steve Brown says some prospective buyers who have above-average credit scores but low downpayments are being deterred from homeownership by the high cost of Federal Housing Administration (FHA) mortgage insurance.
“Access to affordable credit continues to hamper young, prospective first-time buyers,” says Brown. “NAR recommends that FHA reduce high annual mortgage insurance premiums for all qualified homebuyers and eliminate the insurance requirement for the life of the loan.”
Private mortgage insurance doesn’t last the life of the loan. You typically build enough equity to cancel your private mortgage insurance within five years.
How Long Do Homes Take to Sell?
|Home Type||Median Number of Days on the Market|
Regional Existing-Home Sales
|Sales Volume Compared to June 2013
||Median Price||Median Price Compared to June 2013|
|Northeast||Down 3.0%||$269,800||Down 0.1%|
|Midwest||Down 2.4%||$177,900||Up 4.6%|
|South||Down 1.0%||$192,600||Up 3.4%|
|West||Down 7.3%||$301,000||Up 7.2%|