Two more signs of improved economic growth came out today. Boosted by a greater share first-time buyer sales not seen in nearly four years, existing-home sales maintained their upward trajectory in June and increased for the fourth consecutive month, according to the National Association of Realtors. Only the Northeast saw a decline in closings in June, and sales to investors fell to their lowest overall share since July 2009.
This is while the Conference Board’s Index of Leading Economic Indicators, a predictor of future growth, rose 0.3 percent in June. “The U.S. LEI picked up in June, reversing its May decline,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “Improvements in initial claims for unemployment insurance, building permits, and financial indicators were the primary drivers. While the LEI continues to point to moderating economic growth in the U.S. through the end of 2016, the expansion still appears resilient enough to weather volatility in financial markets and a moderating outlook in labor markets.”
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, climbed 1.1 percent to a seasonally adjusted annual rate of 5.57 million in June from a downwardly revised 5.51 million in May. After last month’s gain, sales are now up 3.0 percent from June 2015 (5.41 million) and remain at their highest annual pace since February 2007 (5.79 million).
The share of first-time buyers was 33 percent in June, which is up from 30 percent in May and a year ago and is the highest since July 2012 (34 percent). Through the first six months of the year, first-time buyers have represented an average of 31 percent of buyers; they were 30 percent in all of 2015.
But very low housing inventory is hampering many entry-level homebuyers. Total housing inventory at the end of June dipped 0.9 percent to 2.12 million existing homes available for sale, and is now 5.8 percent lower than a year ago (2.25 million). Unsold inventory is at a 4.6-month supply at the current sales pace, which is down from 4.7 months in May.
On the other hand the Federal Housing and Finance Authority’s price index that documents conforming, more affordable home prices, is slowing, which should help affordable homebuyers. The FHFA house price index rose only 0.2 percent in May for the weakest performance since August last year and one of the weakest of the whole recovery. The year-on-year rate is likewise sagging at recovery lows, at plus 5.6 percent for a 3 tenths dip from April.
“First-time purchasers have begun coming back to the housing market, more slowly than expected and more slowly than they have historically,” Stuart Miller, chief executive of Lennar Corp. said during the builder’s call Wednesday to discuss its fiscal second quarter results with investors. “They’ve had the most difficulty accessing the mortgage market. And although that is beginning to open up … they are not yet jumping into the marketplace.”
New England is among the weakest regions, down 1.3 percent in the month with a year-on-year gain of only 3.9 percent. The Pacific and Mountain regions are the strongest, the former down slightly in the month but up 7.9 percent on the year with the latter up 1.2 percent in the month for an 8.5 percent year-on-year gain.
“The modest bump in June sales to first-time buyers can be attributed to mortgage rates near all-time lows and perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way onto the market,” said NAR chief economist Lawrence Yun. “The odds of closing on a home are definitely higher right now for first-time buyers living in metro areas with tamer price growth and greater entry-level supply — particularly areas in the Midwest and parts of the South.”
So let us hope that builders fill the dearth of entry-level housing that would bring in more young homebuyers as they form their own families.
Harlan Green © 2016
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