WASHINGTON – Sales of previously owned homes rose for a third straight month in June, pushing activity to the highest level in eight months and providing evidence that housing is regaining lost momentum.
The National Association of Realtors said Tuesday that sales of existing homes increased 2.6 per cent to a seasonally adjusted annual rate of 5.04 million homes. It marked the first time that sales have been above the 5 million-mark since October.
Even with the three months of increases, however, sales were still 2.3 per cent below the sales rate in June of last year.
Sales peaked in July last year and then lost momentum as mortgage rates rose from extremely low levels. Sales were further hurt by an unusually severe winter.
After peaking at 5.38 million units last July, sales had been falling as mortgage rates climbed from historic lows after then-Fed Chairman Ben Bernanke indicated in June that the central bank could begin trimming its monthly bond purchases later in the year.
The Fed did start reducing the bond purchases in December but mortgage rates have actually retreated as financial markets realized the Fed intended a gradual reduction of the long-interest rate support it has been providing the economy. Rates on 30-year mortgages stood at 4.12 per cent last week.
The median price of a home sold in June was $223,300, up 4.3 per cent from a year ago.
For June, sales were up in every region of the country, led by a 6.2 per cent increase in the Midwest and a 3.2 per cent rise in the Northeast. Sales rose 2.7 per cent in the West and edged up a slight 0.5 per cent in the South.
The percentage of first-time buyers edged up slightly to 28 per cent of sales in June, up from 27 per cent in May and above the recent low of 26 per cent.
Lawrence Yun, chief economist for the Realtors, predicted that the share of first time buyers would keep rising as the labour market keeps improving. But he noted that the level is still well below the 40 per cent of sales that first time buyers normally represent.
The inventory of unsold homes stood at 2.3 million homes at the end of June, up 6.5 per cent from a year ago. That level would represent about 5.5 months of supply at the June sales pace, close to the 6 to 7 months that are considered normal for inventories.
Fed Chair Janet Yellen, delivering the central bank’s twice-a-year economic report to Congress last week, described housing activity this year as disappointing, an indication that the central bank is still concerned about the performance of this key sector of the economy.
Potential buyers have grappled with a limited supply of homes that is driving prices higher. Lending standards have also been tightened in response to the housing boom of the last decade, when financial institutions granted too many mortgages to home buyers who were unable to meet the monthly payments, resulting in millions of foreclosures.
Five years into the recovery from the deep recession that was triggered in part by the collapse in housing, home sales have yet to return to historic averages. The pace for sales this year is below the 5.1 million homes sold last year and the 5.5 million annual sales that would be consistent with a healthy housing market.