U.S. home sale volume inched up for a second month in a row, and for a simple reason: house hunters actually have some choices.
- The volume of home sales bounced back a bit more, rising 2% in July as buyers had a few more choices.
- The supply of homes for sale rose for a fifth month, putting this winter’s record shortages further in the rearview mirror but still staying far below normal levels.
- The increase in inventory provides a bit more balance to the market, a turn that may alleviate increasingly unaffordable prices.
Sales of existing homes increased 2% from June to July, rising to a seasonally adjusted annual rate of 5.99 million—the highest for any month since March, the National Association of Realtors said in a report Monday. That includes single-family homes, townhomes, condos and co-ops.
The number of homes for sale rose too, rising 7.3% to 1.32 million in the fifth month of increases. While that’s still not much by historical standards, it’s the most on the market since October. It would take 2.6 months to exhaust that inventory at the current rate of sales, an improvement from the 2.5-month supply logged in June and the most in 10 months.
“Still slim pickings (but not as slim as they once were),” wrote Jennifer Lee, an economist for BMO, in a commentary. “There is a bit more choice these days.”
While the inventory of homes for sale is still well short of the 6-month supply associated with “moderate” price increases, according to the realtor group, it’s better than the record low of 1.9 months’ worth seen in December. The shortages were a major driver of declining home sale volume February through May, and a big reason home prices had increased so rapidly this year.
Buyers eager for extra space in the pandemic have resorted to bidding wars, waiving home inspections, and even writing personal letters to sellers. But the uptick in inventory should somewhat alleviate the fierce competition, reducing multiple offers and helping home prices to level off, according to Lawrence Yun, chief economist of the realtor group.
The median sale price was $359,900, down from $362,800 in June but still 17.8% higher than in July 2020. (Prices typically fall from June to July, though they didn’t last year.)
"Although we shouldn't expect to see home prices drop in the coming months, there is a chance that they will level off as inventory continues to gradually improve," Yun wrote in the report.
Indeed, buyers shouldn’t hold their breath waiting for a big price drop, since relatively low rates for home loans have fueled demand by making houses more affordable than they otherwise would be, according to Nancy Vanden Houten, lead U.S. economist of Oxford Economics.
“Inventory remains lean despite the increase in July, and that will keep a floor under home prices, which are unaffordable for many prospective buyers,” Vanden Houten wrote in a commentary.
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