First-time buyers push June existing home sales up 1.1%

Dive Brief:

Existing home sales increased 1.1% between May and June to a seasonally adjusted annual rate of 5.57 million, the National Association of Realtors reported last week. June's rate of sales, helped along by a four-year-high share of first-time homebuyer purchases, was 3% higher than June 2015 and is still at its highest point since February 2007.
Regionally, the Midwest (3.8%) and West (1.7%) showed sales gains, while purchases in the Northeast declined (-1.3%) but held steady in the South. Nationally, properties — excluding short sales and foreclosures — stayed on the market for an average of 34 days in June, up two days from May.
The median existing home price in June, marking its 52nd consecutive rise, was $247,700, up slightly less than 3.5% from May and 4.8% higher year over year.

Dive Insight:

Investor activity, as measured by all-cash sales, accounted for only 11% of June sales — the lowest figure since July 2009's level of 9% — down from 13% in May and 12% in June 2015.

The big story is the 3% rise in first-time homebuyers from May — a shift that can be chalked up to low mortgage rates and possibly a new supply of affordable homes, according to NAR Chief Economist Lawrence Yun. "The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply — particularly areas in the Midwest and parts of the South," he said in a release.

While sales are enjoying their fourth straight month of gains, Yun warned that even the current ripe economic conditions might not be able to overcome low inventory and rising home prices. According to the NAR, June housing inventory fell 0.9% to 2.12 million units, a year-over-year decrease of 5.8%. In fact, according to a recent piece in Forbes, this lack of inventory will continue to plague the market for the rest of the year. Forbes reported that in May, the annual rate of single-family home starts was a mere 1.138 million, well below the necessary 1.5 million needed to catch up to demand. In addition, builders are producing a greater share of luxury homes, depressing entry-level inventory even further.

Looking forward, the NAR said that the recent passage of the Housing Opportunity Through Modernization Act would provide an "affordable entry point" to the housing market through a "less burdensome" Federal Housing Administration purchase and recertification process, as well as a program to increase rural housing loans.