Existing-Home Sales Fall Again in June

By Robert Hughes

Sales of existing homes fell 1.7 percent in June to a 5.27-million seasonally adjusted annual rate. Sales are down 2.2 percent from a year ago and appear to be trending roughly flat in the 5,000 to 5,500 range (see chart). Sales declined in the two larger regions but rose in the two smaller regions: sales were off 3.4 percent in the South (the largest region by volume) and were 0.4 percent below the year-ago level; sales declined 3.5 percent in the West, putting sales 5.2 percent below year-ago levels; sales rose 1.6 percent in the Midwest, leaving that region’s sales rate 1.6 percent below the year-ago pace; and sales rose 1.5 percent for the month in the Northeast but are 4.2 percent below the June 2018 rate.

Sales in the market for existing single-family homes, which account for just under 90 percent of total existing-home sales, fell 1.5 percent in June, coming in at a 4.69-million seasonally adjusted annual rate. From a year ago, sales are down 1.7 percent. Sales across the four regions showed a pattern similar to the total, with the South and the West showing declines in June and the Midwest posting a gain. However, the Northeast was unchanged from May to June. From a year ago, sales are down in three regions and flat in one, the South.

Total inventory of existing single-family homes for sale rose 1.2 percent to 1.71 million in June, the sixth increase in a row and the highest level since June 2018, leaving the months’ supply (inventory times 12 divided by the annual selling rate) at 4.4, up 2.3 percent from May and 2.3 percent above the year-ago level.

Home prices are still rising, but the pace of increase continues to slow. The home-price index for purchases from the Federal Home Finance Agency rose 0.1 percent in May, leaving the 12-month gain at 5.0 percent (see chart). That is the slowest 12-month gain since January 2015.

Despite a sharp decline in mortgage rates over the last few months, sales are generally trending flat and are unlikely to move significantly higher in the coming months. With inventories on the rise, new-home construction is unlikely to contribute significantly to growth in gross domestic product in coming quarters. Still, other areas of the economy remain healthy, supported by a tight labor market, rising incomes, strong balance sheets, and relatively high levels of consumer confidence. The main risks continue to be uncertainty surrounding monetary, fiscal, and trade policy, and fallout from escalating trade wars.

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Robert Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.