U.S. existing home sales rise for third straight month
Bolstered by the sale of low-priced and foreclosed houses, U.S. existing home sales rose 3.6 percent in June to a seasonally-adjusted annual rate to 4.89 million units, the National Association of Realtors announced Thursday.
Economists surveyed by Bloomberg News had expected June existing home sales to total a 4.85-million-unit annualized rate. Sales totaled a 4.77-million-unit annual pace in May.
Even better, inventories of existing homes fell again in June, to a 9.4-month supply at the current sales pace, down from a 9.8-month supply in May, and a 10.1-month supply in April. Economists say a healthy, normal existing home market has a three to five month supply of homes available for sale.
In addition, the median home price for all housing types fell to $181,800 in June, a 15.4 percent plunge from the same period a year ago. Further, the median sale price for a single-family home fell 15.0 percent to $181,600; condominiums declined 18.9 percent to $183,300.
What's driving the median home price lower, and also aiding sales? Sales of distressed properties, which accounted for 31 percent of sales in June. However, the 31 percent represents an improvement from the 45-50 percent distressed sales ratios recorded earlier this year.
John Ryding, chief economist for RDQ Economics LLC in New York, said the market mechanism is working as expected, with lower prices beginning to clear inventories, but investors should not look for a quick housing sector snap-back.
"Market-clearing price levels are resulting from the foreclosure wave," Ryding told Bloomberg News Thursday. "This will be a protracted bottom, rather than anything that will show a quick recovery."
Economists also caution that the summer season - calendar June, July, and August - often distorts real estate data to the upside, due to the large number of families who choose to move during this period, when school is not in session. Hence, a more-accurate gauge of the housing market trend is a 6-9 month period, i.e. one that includes data from at least one non-summer quarter.
Notch another modest positive for the U.S. housing sector. Existing homes sales are not advancing at a robust pace, but they've now risen for three consecutive months: that's not fantastic, but given where the sector was, any month that shows a real increase is a small victory. Further, after discounting for the summer season, if existing home sales continue to rise this autumn, that would represent another sign that the U.S. recession is bottoming, and that an economic recovery is approaching.