June Existing Home Sales: Rapid Reaction

• Existing home sales fell 0.6 percent in June and 2.2 percent from a year ago, to 5.41 million sales (SAAR), according to the National Association of Realtors. It was the fourth consecutive annual decline in sales, the first such streak since late summer 2014.
• Inventory of homes for sale rose 4.3 percent from May and 0.5 percent from last year, the first annual increase since June 2015.
• The median (seasonally adjusted) price of existing homes sold last month was a record high $258,030, up 5.2 percent from a year ago.

Existing home sales have plateaued over the past year and a half, even as prices have risen to new highs – yet another signal that the post-recession rebound in home buying has seemingly run its course. Today's data will undoubtedly raise questions as to whether the housing market has reached an inflection point after years of sellers holding the upper hand -- even though any gains for buyers at this point will be marginal, at best, and in the near term the market is more likely to become simply less frenetic and not meaningfully slower. Over the course of the economic recovery, the South has been driving nationwide existing single-family home sales, while sales have stagnated in the West, the second-biggest driver of existing home sales nationwide. But the southern sales engine is beginning to sputter, and without it running powerfully to drive the overall market forward, the chances rise of seeing the entire U.S. existing sales market slide into reverse. Existing home sales in the South have made up almost two-thirds of all sales gains nationwide since the recovery began in early 2012, but that gas seems to be running out. Over the past year, the annual pace[1] of existing home sales growth in the South has slowed from almost 4 percent to less than 1 percent, while the pace has turned negative in every other region since the start of 2018. A big driver of slowing sales growth overall has been the severe shortage of homes actually available to buy, and if there is some good news it’s that inventory seems to have reached a floor and has been mostly stable since the end of 2017. Still, even though inventory has bottomed out, it isn’t yet climbing back up toward more normal levels – and overall numbers mask a big divide between the top and bottom of the markets. Builders are focused largely at the top of the market, and buyers at the highest price points may find things slowly shifting in their favor over the next few months. But the market remains very competitive for entry-level homes. And if sales activity in the South – where prices are typically lower and new housing supply is somewhat easier to add – starts to trail off even more, these currently very anemic sales levels may be about as good as this market is going to get.

[1] 12-month trailing moving average