Hooray, higher prices? That’s the message from the NAR.
The NAR reports Existing-Home Sales Decline 2.7% in May.
Six Key Highlights
- Existing-home declined 2.7%in June to a seasonally adjusted annual rate of 3.93 million.
- Sales are flat from one year ago.
- The median existing-home price for all housing types is up 2% from one year ago ($426,900) — a record high for the month of June, and the 24th consecutive month of year-over-year price increases.
- Total housing inventory is down 0.6% from May and increased 15.9% from June 2024 (1.32 million).
- Supply is 4.7 months at the current monthly sales pace, up from 4.6 months in May and 4.0 months in June 2024.
- Sales are down 38.0 percent from the cycle high of 6.34 million in January of 2022.
Lawrence Yun, NAR Chief Economist Comments
“The record high median home price highlights how American homeowners’ wealth continues to grow—a benefit of homeownership. The average homeowner’s wealth has expanded by $140,900 over the past five years,” said NAR Chief Economist Lawrence Yun.
“Multiple years of undersupply are driving the record high home price. Home construction continues to lag population growth. This is holding back first-time home buyers from entering the market. More supply is needed to increase the share of first-time homebuyers in the coming years even though some markets appear to have a temporary oversupply at the moment.”
“High mortgage rates are causing home sales to remain stuck at cyclical lows. If the average mortgage rates were to decline to 6%, our scenario analysis suggests an additional 160,000 renters becoming first-time homeowners and elevated sales activity from existing homeowners,” Dr. Yun continued.
“Expanding participation in the housing market will increase the mobility of the workforce and drive economic growth. If mortgage rates decrease in the second half of this year, expect home sales to increase across the country due to strong income growth, healthy inventory, and a record-high number of jobs.”
These cheerleaders never discuss recession.
Factor in mortgage rates near 7 percent, a slowing economy, and massive tariff uncertainty. Housing is going nowhere until prices collapse and mortgage rates come down.
Yun cannot say that, so he sings the same happy tune for years.
The best thing the NAR has going for it is rising inventory that will eventually pressure prices.
But homes are light years away from being affordable and wage growth has stalled.
Existing-Home Sales Percent Change from Year Ago
Existing home sales are unchanged from a year ago.
Existing-Home Sales Percent Change from Month Ago
Existing-home sales fell 2.7 percent in June. In July of 2024 they rose 1.3 percent.
Looking ahead to year-over-year sales for July, the month-over-month number to beat is 1.3 percent.
If the July month-over-month number is better than 1.3 percent, the year-over-year number will improve, otherwise not.
Existing Home Sales Median Price
The NAR does a horrendous job with seasonal adjustments. This data should be seasonally adjusted but doesn’t appear to be.
But even with data the NAR says is seasonally adjusted, there are obvious errors, just not of this magnitude.
For example, the lead chart shows a bounce in February sales in every year, typically the high of the year.
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Economy at Stall Speed
I count three Fed regions up, and a fourth if you count Boston listed as “flat or up slightly”. Richmond was the standout. The Richmond area grew “moderately.”
New York and Philadelphia declined “modestly”
Add it all up and you have an economy at stall speed.
Are Home Prices Rising?
I do not believe they are because median price, not seasonally adjusted, is a terrible metric, especially in low volume situations.
For discussion, please see my June 24 report Home Prices Decline for the Second Month but It Doesn’t Even Register
Today’s new-house sales report shows months of supply soaring, similar to existing house supply.
New house prices continue dropping. Existing house prices already falling in many markets. Condos lead houses downward.
Supply will rise as speculators unload “investment” properties to cash out.
Expect prices to drop faster as months of supply keep rising.
Ignore median price: at market tops it is skewed by changes in sales mix.
Recession would put additional upward oressure on supply as families and young people combine households to save money,
The FED’s not tight. Bernanke contracted money flows for 4 years. Powell contracted money flows for 22 months.
Berkshire estimates 14-16M homeowners will exit the housing market over the next 10 years. These are primarily older boomers, with the younger ones right behind. If anything, price deflation and massive inventory increases are coming. Real Estate is exactly like any cyclical market: it will reset accordingly.
There has been a lot of yammering lately about the supposed need to lower interest rates (screw inflation risk) so that people could buy houses, as if house buyers are some special voting block that the health of the economy revolves around.
The problem isn’t interest rates. Many years back in the 1982 time frame, when I was married and we bought our house in NJ, we paid something like 11.5% interest.
The problem is that housing is simply to expensive. The county I live in CA has a median house price of $2 million. Almost no one starting out can afford a house here, except with help from their parents and big $$$ jobs. Lower interest rates aren’t going to make much difference.
Lower interest rates would actually worsen the situation by creating a buyer-rush and a new seller’s market. Increasing inventory (by a variety of methods) is the only solution.
The only people buying houses now are the wealthy. Everything is working as intended.
Average homebuyer age is 56. Pure insanity.
The feds hight interest rates are just non locals stealing money from main street. Home buyer either pays the dark fed more money every month or the local seller
If the Trump administration is able to eliminate capital gains taxes on home sales, prices will move higher.
Or lower since it might make the market liquid again.
Housing after tax returns will increase relative to stocks and bonds. This will cause people increase their portfolio allocations to their principal residence which will drive prices higher.
Most people will see they can sell tax-free for the moment and take advantage before the loop-hole closes. If your home is your principle asset you are not looking at it as a part of your portfolio. It is your portfolio.
Politically, it would be difficult to close the loophole. Plus, Fidelity advisors for high net worth clients include your principle residence in a portfolio analysiis. This is common in the industry.
Most people do not consult Fidelity high worth advisors because they are not high-net worth individuals so I don’t see how that would affect their decision to sell. However if the loophole opens then they are smart enough to judge that the opening is temporary and would sell even without the advice of a Fidelity high net worth advisor.
It is more than high net advisors. Mom and pop retirement advisors also include the house as an asset in the retirement portfolio.
Most people (ie those not benefiting from things like Prop 13) would immediately do a wash sale so that in case it was ever closed in the future their current buy price would be the current value of the home so there would be no unrealized gains.
If capital gains is eliminated, supply will go up markedly as investors (who know that they will be targetted before long) will use it as a great time to liquidate all or part of the portfolio. Those “evil” landlords will let everyone see how things go without people providing housing for those who cannot afford to buy.
But, if investors unload their real estate, then there will be less rentals, and rent prices will jump. This will support higher home prices.
But what if they sell to other evil landlords then the first evil landlord gave a gift to the evil landlord that bought his property. Nothing changes.
Once again, the fundamentals are that after tax returns will increase on your principal residence, so more money will flow into housing from stocks and bonds, driving housing prices higher. You can not explain this away.
Furthermore, there will be less rentals since more homes will be converted back to principal residences.
As long as not enough new building takes place prices will stay too high.
As I said above to Doug78, they just have to do a wash sale to themselves for current market value. That way any gains are tax free and their buy price is now current market value so there would be no unrealized gains.
Not sure how the wash sale works. But if it was purchased for $100K and it’s now worth $200K … if they sell to themselves for $200K … they will pay the $100K in cap gains there. I believe Cap Gains should at least be indexed for inflation (if not eliminated) … but I don’t see how a sale could be arranged where what was purchased for $100K is sold for $200K w/out taking on a cap gain. If this is doable (legally), I sure wish my accountant would have had me do it when I sold an investment that I had held for 23 years (and took an absolute bath on cap gains).
I mean if he removes the cap gains tax on homes THEN everyone should immediately do a wash sale in order to eliminate any future president/congress from re-enacting them and making you pay tax on the gains.
That makes perfect sense. As someone who spent the last 30 years of my IT career building a portfolio … if the cap gains tax were lifted, I’d sell 5 homes right off to get down to owning 10. Then as the “evil landlord” bills start rolling in … I should be able to stay underneath the caps for at least a little while. IMHO, housing supply has a major supply increase if they cut cap gains. Even if they cut cap gains only for folks selling rentals to their current tenants (and put a subsidy program in place) … I’ve probably got at least 4 tenants who would be interested.
Cap gains on houses doesn’t kick in until $500K in gains, for principal residence.
Eliminating cap gains only helps millionaires.
I’m speaking of investors. Cap gains kicks in on $1 for us. And if we buy a house for $125K … hold it for 20+ years … and sell it for 350K (which, inflation adjusted for 20+ years is actually $135K) .. .then we pay over $40K (fed and state) on real earnings of $10K. That’s not about millionaires … that’s about Mom and Pop getting the shaft.
Only sales of currently-unoccupied houses would alleviate price pressure. Owners moving from one occupied house to another is net-zero for demand.
I’m speaking of investment properties. If cap gains went away (or at least were indexed for inflation so they stop taxing us for phantom gains) … I would sell any unoccupied rental and probably not renew leases on a few (or give buyer opportunity to keep tenants).
One of the primary reasons houses are so expensive is that they are treated as investments, instead of a mere roof over one’s head.
The current tax breaks they enjoy and any new ones such as a total capital gains exclusion will only exacerbate this problem and cause the price of houses to rise further, faster.
Houses are also protected in bankruptcy which adds to their value.
Looking purely at supply and demand … an elimination or reduction in cap gains (in all honesty, they should at least be indexed for inflation) … would cause a serious increase in supply.
An increase in supply, and also a serious increase in demand.
I could see the increase in demand as investors trade out stock to rebase their investments (since we know Cap Gains tax will come back). But many will not look to replace all stock, so I believe demand increase will pale in comparison. That said, worst case … there is an amazing flurry of sales which will provide immense revene for realtors, financial institutions, lawyers, and gov’t collecting fees on top of fees on top of fees … and probably some insurance companies making a nice cut as well.
Most areas of the Northeast U.S. still have hot housing markets and this is entirely due to an extreme shortage of houses for sale.
I know that’s hard to believe for someone living in Florida or Texas where price declines and oversupply are the norm.
West Hartford, Connecticut median home price is up 18% year over year to $600K. 79% of homes sell over list price. Average sold price is 109% of list price.
The craziest thing is, the price increases in CT actually accelerated after mortgage rates shot up to 7% in 2022 because the supply became even tighter.
Get rid of GSEs.
Limit corporate investor landlords to 1040 Schedule E deductions, same as Ma & Pa. Or no deductions for SFH.
So single out some businesses for tax disadvantage? Screw the folks providing housing for those who cannot or do not want to purchase a home. OK.
I get it,
1) income tax should be eliminated, count me in.
2) the houses will disappear.
If you are successful with this on crashing the market … all those folks for whom house was really their only retirement will be in great shape. They won’t have to be taxes on their non-existent income though.
Rising home prices combined with falling sales = STAGFLATION. We are there.
Many people do not understand this.
Stagflation is a macroeconomic concept – for the ENTIRE economy, on average, to slow down with higher inflation for all prices generally (CPI).
You are discussing a microeconomic concept – sales of homes. The two concepts are distinctly different and should not be used interchangeably.
If the economy was at “stall speed”, we’d see it in unemployment, consumer spending and credit spreads. The supply/demand dynamic in real estate is wholly divorced from all three.
Ross imo any indicator using employment these days may be skewed.
We have very large population of retires still requiring goods and services. Also looking at a good percent of the retired population have 401 ks and or have inherited 401 ks/
Didn’t I read something about a Japanese tariff accord signed today that puts 15% tariffs on Japanese imports or was I dreaming?
And markets are rallying on the news.
I wonder how much of us housing is still owned by wall street. How much does immigration consume. And the effect of both on the market.
Corporate-owned: 3.8% (600K homes)
“Illegal” immigrant occupied homes: 6M households, or roughly 10x as many corporate-owned homes.
Total of 6.6M “dwellings” shall we say.
Non-zero but barely more than trivial effect? Deport 10% of immigrant-occupied homes and you basically offset the corporate-owned homes (and that assumes immigrant ownership and that those homes don’t just rejoin the rental market). I don’t know, this is way too complex to even muse about.
Thanks. Yeah complex. Add in air b&bs locations people want to live not to mention
Boomer s passing.
Everything is connected.
The housing market is vast and fluid (and static too). It grows, it stagnates, it transmogrifies. It’s a living, breathing entity and no individual outcome can be predicted through statistical analysis. Like Mish has said many times, the forces majeur (The FED, USG policy, aspects of nature and human economy) can’t change the direction but they can affect the rates of acceleration or deceleration.
From where I sit, depopulation looks to be policy. We’ll see where that leads.