June Home Sales Forecast: Are the Tables Turning for Home Sales?

By Aaron Terrazas on 19 Jul 2016

• Zillow expects existing home sales to fall 1.4 percent in June from May, to 5.45 million units at a seasonally adjusted annual rate (SAAR), ending a string of three consecutive monthly gains.
• New home sales should rise 0.5 percent to 554,000 units (SAAR).
• Sales of existing homes drove much of the overall growth in home sales in recent years. But new home sales are contributing more lately, although there remains a big gap.

For much of the housing recovery, economists (ourselves included) have puzzled over diverging trends in existing and new home sales: Sales of existing homes were growing strongly, while sales of new homes remained stubbornly low. But now the tables appear to be turning.

Exceptionally tight inventory has held back existing home sales through the first half of 2016, while home builders have begun to increase capacity. For the year ending June 2016, we expect existing home sales to be essentially flat compared to a year earlier. But new home sales should be up more than 17 percent from last year. Still, there’s a big gap to make up: Existing home sales remain 25 percent below their bubble-era peak, and new home sales remain 60 percent below their mid-2000s high.

We expect existing home sales to fall 1.4 percent month-over-month in June, to 5.45 million units at a seasonally adjusted annual rate (SAAR) from 5.53 million units in May (figure 1). At the same time, we expect new home sales to increase, rising 0.5 percent to 554,000 units (SAAR) (figure 2). If so, this would mean that existing home sales will have been essentially constant since the end of last year, while new home sales will have increased 3 percent over the same time.

The number of existing homes for sale in May was down 5.75 percent from a year earlier, according to the National Association of Realtors (NAR), and has fallen year-over-year 12 consecutive months. Tight inventory has contributed to rising prices. We expect the median price of existing homes sold in June to rise to $231,000 – just shy of all-time highs recorded earlier this year – up 0.5 percent from May and 5.7 percent over the year.

But while existing home sales have stalled, new home sales have been unexpectedly buoyant. Construction permits, starts and homes under construction all rose through the spring. New home sales were particularly strong in April, even after downward revisions to the initial data. This trend should continue in June with steady upward movement in new home sales (figure 2).