July Home Sales Forecast: Inventory Plateau Leaving Buyers High and Dry

• Zillow expects existing home sales to edge 0.1 percent lower in July from June, falling to 5.51 million units at a seasonally adjusted annual rate (SAAR).
• New home sales should fall 1.4 percent from June, to 601,000 units (SAAR), roughly in line where they have been for much of 2017.

Since peaking in March, home sales have trended lower. In previous years when home sales did that, inventory tended to increase as unsold homes on the market accumulated. Of course, that is not the case this time. Tight for-sale inventory constrained sales in the first place.

Existing Homes: More Than Two Years of Inventory Contractions

Existing home sales have hovered around 5.6 million units at a seasonally adjusted annual rate (SAAR) since last fall, and inventory has now been contracting on an annual basis for 25 consecutive months. We expect this trend to continue in July with existing home sales – which the National Association of Realtors (NAR) will report next Thursday – forecasted to edge slightly lower, falling 0.1 percent to 5.51 million units SAAR. Given a sharp drop in sales last July, the number of existing homes sold would still be up 3.6 percent over the year.

Mortgage rates were generally 5 to 15 basis points higher in July than in June, which posed a modest headwind to buyers. (Thus far in August, rates have declined to their June levels.)

 

New Homes: A sharper decline

We expect new home sales – which the U.S. Census Bureau will report next Wednesday – to fall more sharply than existing homes in July, by 1.4 percent to 601,000 units SAAR. Although the number of home sales have increased in 2017 – averaging 607,000 a month during the first half of 2017 compared to an average of 574,000 a month during the second half of 2016 – the sharp surge in new home sales reported in July 2016 means than we expect new home sales to be down 4.1 percent over the year.

Related:

• Recession Could Hit by Late 2019, Experts Say
• An Inventory Quandary: Three Theories for Why People Are Moving Less
• Hiding in Plain Sight: Tallying the "Hidden" Costs of Homeownership