Existing-home sales rose for the fourth-straight month in July, rising 7.2% month-over-month (m/m) to an annual rate of 5.24 million units, higher than the forecast of 5.0 million and an increase of 2.1%, and June figures were unchanged from the 4.89 million unit rate initially reported. Single-family home sales increased 6.5%, while multi-family sales rose 12.5%. Distressed properties continue to weigh down the median existing-home price, which fell 15.1% year-over-year (y/y) in July to $178,400.
The release is impressive in many aspects, posting the first year-over-year increase since November 2005, and the first fourth-straight monthly rise in five years. And despite a 7.3% increase in inventories to 4.09 million existing homes available for sale, the months of supply of homes remained constant at 9.4 months from a month ago. Within single-family homes, the months of supply fell to 8.6 months from 8.9 months in June, while multi-family rose to 15.1 months from 13.1 months in June.
Sales at the low-end of the market have benefited from tax incentives for first-time buyers and are a disproportionate percentage of sales. The low-end doesn't face the obstacles of the higher-end of the market, which include difficult financing and lack of a trade-up market due to the large number of homeowners who are underwater in their mortgages. As unemployment rises, those homeowners who are underwater on their mortgage and lose their jobs become increasingly at risk of entering foreclosure.
As Schwab's Chief Investment Strategist Liz Ann Sonders, and Director of Sector and Market Analysis, Brad Sorensen, CFA, note in their bi-weekly "Schwab Market Perspective: Inside the Recovery Story", while home prices are still declining, they are falling at a slower pace, and combined with high home affordability and government incentives, buyer confidence has improved. Pent-up demand, seasonality and tax incentives have been able to stimulate sales in recent months. However, entering a seasonally weaker period and bumping up against the November 30 expiration of the $8,000 government incentive will test the sustainability of sales increases. To read the rest of the article, go to www.schwab.com/marketinsight.