Reduced inventory levels in most regions of the U.S., minus the West, slowed existing-home sales in July after rising the prior four months, as year-over-year sales declined for the first time since November 2015.
“Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” said Lawrence Yun, chief economist for the National Association of Realtors (NAR). “Realtors are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.”
The total of existing-home sales, which represent sales of single-family homes, townhomes, condominiums and co-ops, dropped 3.2% to a seasonally adjusted rate of 5.39 million in July from 5.57 million in June, NAR said. For the second time in the last 21 months, sales of existing-homes are below what they were a year ago (by 1.6%).
Also, condo “sales suffered last month as condo buyers faced even stiffer supply constraints than those looking to purchase a single-family home,” Yun said, noting that condo construction stayed flat and currently makes up a tiny sliver of multi-family construction. New home construction is also not catching up with underlying demand.
NAR president Tom Salomone pointed out that on top of affordability problems, realtors are seeing appraisal issues appearing more often as the reason why contract settlements are getting delayed—an issue the industry saw earlier in the housing recovery. “Appraisal-related contract issues have notably risen over the past year and were the root cause of over a quarter of contract delays in the past three months,” he said. A mix of fast-rising home prices and sales in some areas, combined with a reduced number of appraisers tied up in the refinancing market, is exacerbating the problem.
“Realtors are carefully monitoring this trend, and some have already indicated they’re extending closing dates on contracts to allow extra time to accommodate the possibility of appraisal-related delays,” Salomone said.
- Nicholas Stern, editorial associate