Existing home sales for July came in at 5.39 million on a seasonally adjusted annual basis as reported by NAR (National Association of Realtors. This exceeded expectations of both 5.21 million existing homes sold and June’s reading of 5.06 million homes sold.
For new home buyers frustrated with limited inventory, this is a sign things may be getting to a more normalized level.
Rising home prices appear to be enabling previously underwater homeowners to sell. Existing home sales for July rose by 6.80 percent year-over-year.
The Federal Housing Finance Agency (Fannie Mae and Freddie Mac) Home Price Index reported a 7.70 percent year overyear increase in prices for homes financed by the two agencies.
This reading was basically flat compared to May’s year-over-year reading of a 7.60 percent increase in home prices.
New Home Inventories Increasing
New home sales in July dropped by 13.40 percent to a seasonally adjusted annual reading of 394,000; missing expectations of 485,000 new homes sold, but this expectation was based on June’s original reading of 497,000 new homes sold. June’s reading has been adjusted to 455,000 homes sold, which likely would have resulted in a lower expectation.
New home sales were hit most in the West (-16.1%) followed by the South (13.4%), Midwest (-12.9%) and the Northeast (-5.7%).
While this isn’t welcome news for homebuilders, this is a positive for new home buyers looking to get into the market. Supplies of new homes for sale jumped from a 4.30 month supply of new homes in June to a 5.20 month inventory of available new homes in July. This was the highest inventory of available new homes since January 2012.
New Home Sales Continue To Move Higher
Month to-month sales of new homes can be volatile, but July’s year-over-year home sales were 6.80 percent above new home sales in July 2012.
Higher mortgage rates likely stifled sales, but slower sales are increasing inventories of available homes. More homes available can shift the market and level the playing field for home buyers who have previously been dealing with an extreme sellers market over the past year.
The rise in mortgage rates is expected to continue albeit at a much slower pace than we had seen in May and June. With the expectation of the Federal Reserve “tapering” already priced into the market, rates will likely be range bound in the coming months. With that said economic data is key. Signs of an improving economy will put pressure on rates to move higher; however, if we see a pull back in the economy and job growth begins to slow, rates could have a nice correction lower.