NAFCU Expects Home Sales to Finish 2021 Strong

The National Association of Realtors reported sales of existing homes in June showed their first month-to-month gain since January, and said it expects feverish price gains will start to ebb later this year.

Existing homes sold in June at a seasonally adjusted annual rate of 5.86 million units, 1.4% higher than in May with sales flat in the South, but up in all other regions. Sales rose 22.9% from June 2020 with double-digit gains in every region.

NAFCU Chief Economist Curt Long on Friday said he expects sales will remain strong for the rest of the year, but will remain limited by availability and affordability.

“Demand is ebbing somewhat from its frenzied levels of earlier this year, but that is only encouraging buyers who sat out the rush to re-enter the market,” Long said. “A further improving economy and raising wages will also boost sales into the medium and long term.”

The unadjusted median existing-home price rose from $350,400 in May to $363,300 in June, up 23.4% from a year earlier with prices jumping in every region.

The “median price rose to a new all-time high as demand continues to force prices upwards,” Long said. “Mortgage rates have been heading lower, boosting demand and remaining only 23 basis points higher than the all-time low set in January.”

NAR Chief Economist Lawrence Yun said the rate of home sales continues to run above pre-pandemic levels.

“Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales,” Yun said.

“At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year,” Yun said. “Ideally, the costs for a home would rise roughly in line with income growth, which is likely to happen in 2022 as more listings and new construction become available.”

First-time buyers accounted for 31% of sales in June, unchanged from May but down from 35% in June 2020. Individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in June, down from 17% in May and up from 9% in June 2020.

Buyers paid all cash on 23% of transactions in June and May, up from 16% in June 2020.

“Huge wealth gains from both housing equity and the stock market have nudged up all-cash transactions, but first-time buyers who need mortgage financing are being uniquely challenged with record-high home prices and low inventory,” Yun said. “Although rates are favorably low, these hurdles have been overwhelming to some potential buyers.”