After steadily rising for four straight months, stubbornly low inventory levels and affordability pressures caused existing-home sales to falter in July.
Just how bad is the current supply situation? Consider the fact that we were saying a year ago that inventory was too low. Now? Supply at the end of July is 5.8 percent lower than a year ago (2.26 million) and has now declined year-over-year for 14 straight months.
According to Lawrence Yun, NAR chief economist, the dearth of homes for sale is hitting the psyche of buyers despite the fact that mortgage rates continue to hover at historical lows.“Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” he said. “Realtors® are reporting diminished buyer traffic because of the scarce number of affordable homes on the market.”
Broken down by region and housing type, the Northeast (-13.2 percent) and Midwest (-5.2 percent) and condos (-12.3 percent) saw the biggest drop in home sales last month. And prices? They continue to climb above wage growth, up 5.3 percent in July and the 53rd consecutive month of year-over-year increases.
Going forward, it’s simple: for the housing market to realize its full potential, new and existing supply needs to measurably increase.