Single family home sales took a surprising downturn in July to a seasonally adjusted annual rate of 5.44 million units, according to the National Association of Realtors. This marks a 1.3% drop compared to June and the lowest rate of 2017 yet.
NAR Chief Economist Lawrence Yun stated in a press release that this trend indicates the lack of inventory is continuing to negatively impact the homebuying market. Those hoping to make a home purchase struggle to find an available property in their price range.
"Buyer interest in most of the country has held up strongly this summer and homes are selling fast, but the negative effect of not enough inventory to choose from and its pressure on overall affordability put the brakes on what should've been a higher sales pace," Yun said. "Contract activity has mostly trended downward since February and ultimately put a large dent on closings last month."
Meanwhile, the high demand coupled with limited options has pushed home prices ever higher, with July experiencing yet another year-over-year increase. The median existing-home cost in July was $258,300, an increase of 6.2% compared to July 2016. In June, the median price was $263,800, according to a press release from NAR.
Median home prices in the West and the Northeast were even higher, at $373,000 and $290,000, respectively. While the Northeast saw sales rates slowing 14.5% compared to June, the West experienced a gain of 5%.
July ended with an unsold inventory of 1.92 million existing homes available for homebuyers, a 4.2-month supply at the current sales pace. This rate is down 1% from June. Further, the number of housing starts in July didn't paint a promising picture.
Contractors broke ground on 1,155,000 privately-owned housing starts, a decrease of 4.8% compared to June, according to figures from the U.S. Census Bureau. It's also a drop of 5.6% compared to last July.
The decline came as a surprise to economists, who had predicted groundbreakings in July to mirror those in June, according to a poll conducted by Reuters.
"Soft July starts following on June's solid reading is a disappointment as we had expected housing to pick up more robustly from a soft second quarter," Andrew Labelle, an economist at Citigroup in New York, told Reuters.
Labelle went on to note that the unexpected slump was largely affected by lower value housing starts, which are naturally more volatile.
Building permits were also on the decline, falling 4.1% between June and July to a seasonally adjusted annual rate of 1,223,000. This could mean inventory issues will remain present in the homebuying atmosphere for months to come.
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