Existing Home Sales Near High Last Seen in 2007
WASHINGTON -- Existing home sales rose in June to their highest level in nearly 8½ years, a sign of pent-up demand that should buoy the housing market recovery and likely keep the Federal Reserve on track to raise interest rates later this year.
The National Association of Realtors said Wednesday existing home sales increased 3.2 percent to an annual rate of 5.49 million units, the highest level since February 2007.
Existing sales this year are on track to record their biggest gain in eight years, the NAR said. Economists had forecast home resales rising to a 5.4 million-unit pace last month. Sales were up 9.6 percent from a year ago.
June's solid home sales report came on the heels of last week's strong housing starts and building permits data. A tightening labor market is starting to push up wages, helping to boost demand for housing, especially among young adults.
But a tight supply of properties for sale remains a constraint. The string of strong housing reports indicate the economy remains on firmer footing despite a drop in retail sales and a slowdown in job growth last month.
The NAR said sales last month were likely boosted by buyers rushing into the market to beat rising mortgage rates, but added that strong economic fundamentals were the main driver. Those who already own a home accounted for the bulk of transactions in June, with the share of first-time buyers slipping a bit.
First-time homebuyers accounted for 30 percent of the sales, down from 32 percent in May. It was the fourth straight month that this segment remained at or near 30 percent, although it remained well below the 40 percent to 45 percent that economists and realtors say is required for a robust housing market.
The housing index rose 1.64 percent on the data, outperforming the overall stock market, which fell after Apple Inc late on Tuesday gave a fourth-quarter revenue forecast that fell short of estimates and missed some targets for iPhone sales.
Shares in D.R. Horton (DRI), the largest U.S. homebuilder, rose 2.7 percent. Lennar (LEN) was trading 2.2 percent higher.
Economists expect that housing will soften the drag on the economy from manufacturing, which continues to struggle with the lingering effects of a strong dollar and spending cuts in the energy sector, and contribute to growth this year.
Still, housing gains continue to be curbed by a shortage of properties for sale. Residential construction has accelerated but is not keeping up with household formation, which should keep homebuilders busy.
Last month, the stock of unsold homes on the market rose 0.9 percent from May to 2.3 million units. Supply was up only 0.4 percent from a year ago.
At June's sales pace, it would take 5 months to clear houses from the market, down from 5.1 months in May. A six-month supply is viewed as a healthy balance between supply and demand. With supply well below what it was during the housing bubble in 2006, the median price for a previously owned home increased 6.5 percent from a year ago to a record $236,400.
While some buyers may be forced out of the market by higher prices, homeowners are seeing their equity rise. That could lead to more houses being put on the market. Realtors and economists say insufficient equity has contributed to the tight housing inventories.