Home sales for 2016 thus far have been in good shape, but it could be coming to an end, at least temporarily and especially for sales of existing homes that must eventually face the harsh reality of tight inventory and rising prices according to Zillow’s recent July home sales forecast.
The report states that despite tight inventory, existing home sales have been surprisingly buoyant lately, beating or meeting expectations in each of the four months from March to June. This streak is anticipated to end in July, though, as stated by Zillow. They say that the odds that home sales continue to rise are increasingly dim. Since the series began in February 1999, Zillow shows that runs of five months or more of consecutive monthly gains have only occurred five times – and only one of those streaks lasted six consecutive months or more.
Zillow attributes shifting seasonal patterns to be behind some of this apparent resiliency. Zillow cites some reports who show that the height of the home shopping season, which is historically most concentrated during the summer months, shifted earlier this year as buyers sought to get ahead of the competition. But Zillow believes sooner or later, tight supply and rising prices should take their toll.
Their forecast for existing home sales predicts a 1.9 percent decline from June to 5.46 million units at a seasonally adjusted annual rate (SAAR). This would place existing home sales down 0.3 percent compared to a year earlier.
Zillow does state that new home sales have also proven surprisingly strong, beating expectations for the past eight months. Their forecast suggests that new home sales should fall 6.65 percent in July to 553,000 units (SAAR). This would be the largest month-over-month decline since last September. That decline, however significant, would still leave new home sales up 11 percent over the year.
Additionally, while Zillow’s forecast points to fewer new home sales in July compared to June, given the recent record of beating expectations, they view forecasts risks to the upside and would not be surprised if new home sales come in slightly above our forecast for July.