June 2005 Home Sales Set Yet Another Record Defying Predictions Of A Slowdown

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.7 percent in June to a seasonally adjusted annual rate* of 7.33 million from an upwardly revised pace of 7.14 million in May. Sales were 4.4 percent above the 7.02 million-unit level in June 2004; the previous record was 7.18 million in April of this year.

David Lereah, NAR’s chief economist, said home sales were expected to ease slightly from peaks reached over the last couple of months. “Just when you think sales activity is ready to settle into a more sustainable pace, the housing market continues to surprise,” he said. “We’ve been expecting sales to remain at historically high levels, but this performance underscores the value of housing as an investment and the importance of homeownership in fulfilling the American dream.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.58 percent in June, down from 5.72 percent in May; the rate was 6.29 percent in June 2004. “Job growth and economic improvement also are boosting home sales,” Lereah said.

The national median existing-home price for all housing types was $219,000 in June, up 14.7 percent from June 2004 when the median price was $191,000; this is the strongest increase since November 1980 when annual appreciation was 15.6 percent. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Al Mansell, of Salt Lake City, said home sales are expected to ease as the year progresses. “When the housing market eventually slows from red-hot levels, we should see some cooling in price gains,” he said. “Home prices continue to be bid-up in tight markets across the country. Eventually, appreciation rates will slow and come down to normal levels when the shortage of homes on the market improves and comes closer into balance, hopefully, by the second half of next year.”

Historically, home prices rise at the general rate of inflation, plus one-to-two percentage points.

Total housing inventory levels rose 3.8 percent at the end of June to 2.65 million existing homes available for sale, which represents a 4.3-month supply at the current sales pace. “The irony is that housing inventory is tight enough to boost prices but not enough to curb overall sales,” Mansell said.

Existing condominium and cooperative housing sales hit a fourth consecutive monthly record in June, rising 4.5 percent to a seasonally adjusted annual rate of 960,000 units from a pace of 919,000 in May. Last month’s sales activity was 12.4 percent above the 854,000-unit level in June 2004. The median condo price was $223,500, up 14.8 percent from a year earlier. Condo/co-op sales accounted for a 13.1 percent market share.

Single-family home sales increased 2.4 percent to a record seasonally adjusted annual rate of 6.37 million in June from 6.22 million in May, and were 3.2 percent above the 6.17 million-unit pace in June 2004. The median single-family home price was $218,600 in June, up 14.5 percent from a year ago.

Regionally, total existing-home sales in the West increased 5.5 percent to a record annual pace of 1.73 million units in June, and were 3.6 percent above June 2004. The median existing-home price in the West was $317,000, up 17.4 percent from a year ago.

Existing-home sales in the Northeast rose 3.4 percent to a record annual level of 1.23 million in June, and were 7.9 percent above the same month a year ago. The median existing-home price in the Northeast was $250,000, up 13.6 percent from June 2004.

Total existing-home sales in the Midwest showed a 1.9 percent gain to an annual sales rate of 1.63 million in June, the second highest on record, and were unchanged from June 2004; the record was 1.64 million in April of this year. The median price in the Midwest was $177,000, up 12.7 percent from a year earlier.

The home resale pace in the South was up by 1.1 percent to a record level of 2.74 million units in June, and was 5.8 percent higher than a year ago. The median price of an existing home in the South was $193,000, which was 9.0 percent higher than June 2004.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1 million members involved in all aspects of the residential and commercial real estate industries.

* The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

Because there is a concentration of condos in high-cost metro areas, the national median condo price is higher than the median single-family. In a given market area, condos typically cost less than single-family homes.

Existing-home sales for July will be released August 23. The next Pending Home Sales Index will be on August 1 and the forecast will be revised August 9.

Source: The National Association Of Realtors July 25, 2005