Existing-home sales in June touched their highest level so far this year as the supply of available homes for sale continued to improve.
The National Association of Realtors (NAR) reported a 2.6 percent month-over-month rise in existing-home sales last month to a seasonally adjusted annual rate of 5.04 million. May sales were revised slightly upward to a rate of 4.91 million.
June sales were at their highest pace since October 2013, though they remain 2.3 percent down from the 5.16 million pace set a year ago.
NAR's chief economist, Lawrence Yun, credited the monthly increase to gains in inventory levels of existing homes for sale, which climbed 2.2 percent in June to 2.30 million, the highest level in more than a year.
"This bodes well for rising home sales in the upcoming months as consumers are provided with more choices," Yun said.
On the other hand, he noted that new home construction needs to pick up by at least another 50 percent for a complete return to a balanced market, especially with supply-choked regions like the West seeing continued upward pressure on house prices.
Also holding back sales is a lack of wage growth, even as payrolls swell.
"Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month. However, the lack of wage increases is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates," Yun said. "Income growth below price appreciation will hurt affordability."
As home prices continue to grow year-on-year, stagnant wages have created affordability concerns. For all housing types—townhomes, condominiums, co-ops, and single-family houses—the median existing-home price in June was $223,300, an increase of 4.3 percent year-over-year, NAR reported.
Due in part to declining numbers of affordable homes, the share of first-time homebuyers continued to underperform, rising slightly to 28 percent.
NAR President Steve Brown said prospective first-time buyers are also being deterred by the higher cost of mortgage insurance from the Federal Housing Administration (FHA).
"NAR recommends that FHA reduce high annual mortgage insurance premiums for all qualified homebuyers and eliminate the insurance requirements for the life of the loan," he said.
Brown's remarks echo concerns voiced by the group as FHA announced the rollout of its Homeowners Armed With Knowledge (HAWK) program, which is designed to provide insurance pricing incentives to first-time homebuyers who participate in home counseling and education.
While acknowledging that HAWK is "a good start," Brown once again called for further cost reductions for participating homebuyers.
Existing-home sales improved on a monthly basis in all census regions, rising the most in the Midwest: 6.2 percent to an annual rate of 1.20 million.
Next was the Northeast, where sales rose 3.2 percent to a rate of 640,000, and the West, where sales picked up 2.7 percent to 1.14 million.
Sales in the South rose only slightly, increasing 0.5 percent to an annual level of 2.06 million.