Steel Markets

Tight Inventory Slows July Sales of Existing Homes

August 24, 2016

Existing home sales lost momentum in July, falling for the first time since November 2015. The National Association of Realtors reports that sales were down 3.2 percent from June to a seasonally adjusted annual rate of 5.39 million. On a year over year basis sales fell 1.6 percent marking only the second time in the last 21 months that sales were below their year ago level.

Lawrence Yun, NAR chief economist, says existing sales fell off track in July after steadily climbing the last four months due to lack of affordable homes available to buyers. “Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” he said. “Realtors are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.”

Buyers of single family homes were not the only ones frustrated by availability. Condo buyers faced tight inventory as well, along with a slowdown in new construction.

Median existing home price rose 5.3 percent year over year to $244,100. Inventory supply was 0.9 percent higher at 2.13 million existing homes for sale but was 5.8 percent lower than the 2.26 million available a year ago. Supply at the current sales rate would last 4.7 months, up from 4.5 months in June.

Sales fell in all regions of the U.S. except the West which posted a 2.5 percent rise in purchases. Sales in the Northeast, Midwest and South dropped 13.2 percent, 5.2 percent and 1.8 percent, respectively.

“Although home sales are still expected to finish the year at their strongest pace since the downturn, thanks to a very strong spring, the housing market is undershooting its full potential because of inadequate existing inventory combined with new home construction failing to catch up with underlying demand,” adds Yun. “As a result, sales in all regions are now flat or below a year ago and price growth isn’t slowing to a healthier and sustainable pace.”