Existing home sales in July, likely capturing contracts signed in April thru June (and thus the important Spring transactions before all the kids get to their new schools in the fall), totaled 5.44mm annualized, 110k below expectations and down from 5.51mm in June. That is the slowest pace of closings since August 2016. Months’ supply held at 4.2 as the number of homes for sale fell slightly with the decline in sales. The pace of home price gains remained robust as the median price was higher by 6.2% y/o/y, although it dropped sequentially off the June record high.
The important contingent in the data, aka the first time household (because it not only gives them a home but allows the existing homeowner a chance to sell and move up), made up 33% of sales vs 32% in June and 33% in May. Still well below the historical average of around 40%.
Bottom line, I’ve been saying this for months now, buyers are becoming more resistant to these persistent 5-6% price gains and it is finally catching up to the industry. The NAR said “home prices are still rising above incomes and way too fast in many markets. Realtors continue to say prospective buyers are frustrated by how quickly prices are rising for the minimal selection of homes that fit buyers’ budget and wish list.” While low mortgage rates can ease the monthly burden, the higher home prices go, the more of a down payment that is needed and therein lies part of the problem as many don’t have the savings for it. The NAR says that “buyer interest in most of the country has held up strongly this summer” but the NAHB’s Prospective Buyers Traffic index is still below 50. I can’t square the two. Either way, whether looking at the 6 month low in mortgage purchase applications (although are still up 9% y/o/y), yesterday’s new home sales miss and today’s existing home sales data, something is up with housing and it is price.