of previously owned homes rose by 15.2% in June from one year ago to a
seasonally adjusted annual rate of 5.08 million, but they were down by 1.2% from
one month ago, according to the National Association of
Monday’s report showed that the housing market may be slowly returning to
equilibrium after a year in which demand has outstripped supply, pushing up
prices. At the current pace of sales, there was a five-month supply of homes in
June on a seasonally adjusted basis, up from the 4.9-month supply in May but
down from the 6.1-month supply a year earlier.
Did higher interest rates have an impact on home sales? It’s
probably too early to say. Mortgage rates began to rise during the last week of
May, and many homes that sold in June went under contract in May — before rates
really began to rise. Because many homes that went under contract in June — the
first month of truly higher mortgage rates — won’t close until July, the full
impact of the rate increase won’t be seen for another month.
Some 40% of economists polled by The Wall Street Journal this month said
rising rates wouldn’t have a noticeable effect on sales. Around one-third of
economists said rate increases would slow sales, and around one-quarter said it
would slow home-price gains.
Will higher rates have an impact on prices? There are
already anecdotal signs that higher rates are testing sellers’ ability to ask
for higher prices, particularly in more expensive housing market, such as many
parts of California, which have also witnessed big price gains. But the more
important metric to watch on the home-price front is inventory. As tempting as
it is to lay today’s report on rates, inventory still has been the bigger driver
of price gains and the bigger curb on sales volumes.
What’s happening to inventory? Inventory is still very low,
but it is slowly rising. The 2.19 million homes for sale in June rose by 1.9%
from May but still stood 7.6% below last year’s levels. The year-over-year
declines have been shrinking over the past few months.
For much of the past year, real-estate agents have bemoaned the fact that low
listings have limited sales. Now, if inventory keeps rising, that hurdle should
get lower. Still, inventory is still very low. Bill McBride at the CalculatedRisk
blog offers an important primer on what to focus on in these monthly housing
reports. The key number, he says, “is not sales, but inventory,” because it is
the inventory number that influences prices.
Is the foreclosure picture improving? Unequivocally, yes.
The drop in the share of homes selling out of foreclosure is a big reason
reported price gains have come on so strong this year. But it also means there
are fewer bargains to be scooped up by investors and traditional buyers. In
California, for example, just 10% of homes sold in June had gone through
foreclosure in the last year—down from a high of 58.8% in February 2009.
The NAR said its own member survey found that distressed sales accounted for
15% of sales in June, down from 18% in May and the lowest since the NAR began
tracking this category in October 2008.
Are investors less interested in housing? A separate survey
released Monday showed that investors’ share of home purchases dropped in June
to 20% for all sales, down from 23% in February. Some of this, to be sure, is
seasonal. Investors tend to account for a greater share of home purchases in the
winter months, and a smaller share during the spring and summer season, when
more traditional transactions take place.
Still, the survey, conducted by Campbell Surveys and
Inside Mortgage Finance, raises the prospect that higher prices may
thin out the ranks of investors, which have played a key role in clearing what
was once an oversupply of homes. The share of homes purchased by first time
buyers dropped to 35.7% of all homes, down slightly from 36%. Meanwhile, current
homeowners accounted for 45% of sales in June, up from 44% in May.
By Nick Timiraos
Wall Street Journal