Existing home sales fell by 0.7% to 5.34 million in July, marking the fourth straight monthly decline. Activity is at the slowest pace since February 2016. The July outturn disappointed expectations for a mild 0.4% uptick.
The pullback was concentrated in the condo and co-op segment, where sales fell by 4.8% to 590k. Meanwhile, sales of single-family homes fell by only 0.2% to 4.75 million.
The West (+4.4%) was the only region with an increase in activity last month. Sales slumped in Northeast (-8.3%) after two robust months, while the Midwest (-1.6%) and South (-0.4%) recorded milder declines.
The number of homes available for sale fell 0.5% to 1.92 million in July. That level is unchanged from a year ago, and is still quite low relative to historical levels. Homes typically stayed on the market for 27 days – up from 26 days in June but down from 30 days from a year ago.
Median price growth accelerated to 4.5% y/y – up from 4% in the month prior, but still somewhat below the near-6% pace at the start of the year.
First-time buyers accounted for 32% of sales in July – up slightly from last month but down from 33% from a year ago.
Key Implications
The pullback in existing home sales in July marks another disappointing development for the housing market. The existing home market continues to suffer from a lack of supply, and there was little help from listings in July. Months’ supply of homes for sale was steady at 4.3 months, a low level historically, reinforcing the notion that the weakness is not primarily due to a lack of demand.
Low inventory levels and healthy demand fundamentals have been a recipe for rising prices and reduced affordability. The latter has been falling on a trend basis since early 2017. Not enough new homes being built adds to the supply challenge. New home construction faces rising material and land costs and labor shortages, constraining activity. These barriers are unlikely to dissipate quickly, constraining the housing sector’s performance over the medium term.
