Existing home sales in June reached their highest level in eight years, since before the recession, and they are expected to continue their surge in July, according to online real estate marketplace Auction.com's Real Estate Nowcast.
The latest Nowcast predicts that existing home sales in July will fall between annual rates of 5.49 and 5.84 million annual sales, with a targeted number of 5.67 million. This represents an increase of 3.2 percent from June and a year-over-year increase of 11.7 percent, according to Auction.com.
"May and June existing home sales have both been very encouraging for anyone looking for proof that the housing market is in recovery, and our July Nowcast indicates that this positive momentum will continue into July," Auction.com EVP Rick Sharga said. "One potential area of concern is the steeper-than expected increase in home prices. While this is driven by limited inventory, and a declining number of distressed home sales, affordability may start to become an issue if home price increases continue to outpace wage growth. And if the Fed does move to raise interest rates as expected this fall, we could see home sales volume begin to weaken."
The latest existing home sales report from the National Association of Realtors (NAR), released earlier this week, found that existing home sales were at an annual rate of 5.49 million in June, their highest level in eight years and a 3.2 percent jump from May. This figure was in line with Auction.com's June Nowcast, which estimated an annual sales rate of 5.55 million for existing homes (revised downwardly from 5.57 million). NAR's revised May figure of 5.32 million nearly matched Auction.com's estimate for the month of 5.32 million.
According to Auction.com, from a price perspective, the housing market has shifted from recovery to expansion due to a June increase in existing home prices up to $236,400 as reported by NAR. This figure, in addition to representing a 6.5 percent year-over-year increase, beat the all-time high of $230,400 set in July 2006. June's total also fell within Auction.com's predicted range of $217,482 and $240,375.
The July Auction.com Nowcast predicts that existing home prices will fall between $227,170 and $251,082 during the month, with a target price of $239,126. The target price for existing homes would be a 4.6 increase month-over-month and a 7.7 percent increase year-over-year, according to Auction.com, and would also set a new record for median home prices.
First-time buyer share dropped from 32 percent to 30 percent from May to June, according to NAR. Still, first-time buyer share remained higher than earlier in the housing recovery. Limited entry level inventory, tight credit, and rapidly-rising prices will present challenges to first-time buyers, according to Sharga. Also, all-cash sales (an indicator of true investor purchases) fell to 22 percent in June, down from 24 percent in May and 32 percent from a year earlier.
"This is not surprising given the big increases in prices that are making return hurdles harder and harder to meet," Auction.com Chief Economist Peter Muoio said. "This is the lowest level of all-cash sales since December 2009. Similarly, distressed sales accounted for just 8 percent in June, matching an August 2014 low. Taken together these indicators signify a housing recovery on more solid ground, with fickle investors playing a smaller role, the vast majority of sales non-distressed, prices back to pre-bust levels and sales increasing sharply."