US existing home sales activity declined in July after reaching a post-recession high in June. This is the first drop since February. Existing home sales activity dropped 3.2 percent in sequential terms to 5.39 million from June’s 5.57 million. The headline figure for July came in weaker than market forecasts that called for sales to decline modestly to 5.51 million units. The weakening in the activity was widespread.
The activity was expected to moderate in July after posting four months of back-to-back gains. Mortgage rates declined significantly in the first half of this year. This was one of the key factors for the activity rising this year.
The overall fundamentals continue to be supportive of continued progress in the housing market; however, there are signs that assistance from declining interest rates might have run its course and sales momentum is starting to slowdown, noted TD Economics in a research report. The MBA indexes of purchase and refinance activity corroborates this.
Affordability and sales performances are being weighed on by low inventory of houses available for sales. Home purchases are likely to continue rising in the second half of 2016 on the back of job market gains and low mortgage rates. However, the improvement is expected to be more gradual due to the very low supply, according to TD Economics.
Looking into details of the July report, single-family homes sales fell dropped 2 percent sequentially to 4.82 million, whereas sales in smaller and more volatile condo/co-op segment dropped more significantly, declining 12.3 percent sequentially to 570,000.
But the market continues be short in supply that is exerting pressure on home prices. Median prices grew 5.3 percent year-on-year, a rise from June’s 4.8 percent. Single-family homes with values rose 5.4 percent year-on-year. Prices for condos and co-ops were up 4.1 percent year-on-year.
Of the total transactions, 32 percent was accounted by first-time homebuyers, slightly lower than 33 percent in June. However, this was an improvement from 28 percent seen one year ago. But the share of first-time homebuyers continues to be low relative to historical levels. Inventory of houses available for sale continued to be low in July. The number of for-sale homes rose 0.9 percent sequentially, but dropped 5.8 percent year-on-year.
