Sales of homes in the US are being held by low supply levels.
Pending home sales slipped in June 2015, according to the National Association of Realtors, reversing five months of growth in a row.
The NAR's index, which is based on contract signings, fell 1.8 percent from May's nine-year high, but remains 8.2 per cent above the levels recorded in June 2014. Indeed, despite the decline, the index is at its third highest reading of this year so far and has now increased year-over-year for ten months in a row.
Nonetheless, the market's recovery is being dampened by the imbalance between supply and demand. Modest sales increases in the Northeast and West were offset by larger declines in the Midwest and South.
Nationally, inventory is down 6.5 per cent from last year and down 36 per cent from its peak of 2.4 million homes in July 2011, according to Zillow. The country has had low numbers of homes for sale for almost three years.
Lawrence Yun, NAR chief economist, says that he expects a solid pace of home sales this summer.
"The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows," he comments.
According to Yun, existing-home sales are up considerably compared to a year ago despite the share of first-time buyers only modestly improving. The reason is that the boost in sales is mostly coming from pent-up sellers realising their equity gains from recent years.
"Strong price appreciation and an improving economy is finally giving some homeowners the incentive and financial capability to sell and trade up or down," adds Yun. "Unfortunately, because nearly all of these sellers are likely buying another home, there isn't a net increase in inventory. A combination of homebuilders ramping up construction and even more homeowners listing their properties on the market is needed to tame price growth and give all buyers more options."
Indeed, competition for the homes that are on the market is stiff, which means that new buyers and those with lower budgets are being priced out. The national median existing-home price for all housing types in 2015 is expected to increase around 6.5 percent to $221,900, which would match the record high set in 2006. Total existing-home sales this year are forecast to increase 6.6 per cent to around 5.27 million, about 25 per cent below the prior peak set in 2005.
Photo: Daniel Moyle