In the first month of the summer housing season, home prices continued to rise, with a 0.9% increase in figures for June from the month before, according to the S&P/Case-Shiller Home Price Index. The rate of increase slowed minimally, with two cities (Atlanta and Chicago) posting price jumps of more than 3% (3.4% and 3.3%, respectively) — a benchmark that six cities had broken through the month before.
However, all 20 cities in the index showed some month-to-month gains, and year-over-year the composite 20-city index is up 12.1%. The highest flyers are Las Vegas (up 24.9% year-over-year), San Francisco (up 24.5%), and Los Angeles (up 19.9%).
The index tracks prices of single-family homes, so it is considered less of a reliable market indicator in areas where many of the properties for sale are apartments.
Separately, data from the National Association of Realtors showed that existing home sales (which includes condominiums and co-ops) were running at a seasonally adjusted annual rate of 5.39 million homes for July, a jump from 5.06 million homes in June.
Historically, the volume of homes sold tends to rise as rising interest rates convince buyers on the sidelines that it’s “now or never.” While current rates of 4.51% for 30-year fixed loans — as measured by data provider Bankrate.com — are still quite low compared with those of previous decades, they do represent a pop from the sub-4% rates available earlier in the year.
It’s worth noting that mortgage rates are only a concern of two-thirds of home buyers, as 31% of July sales were all-cash according to the NAR, up from 27% a year ago. The cash buyers may be rate-sensitive, or they may simply be trying to skip the thorough documentation required in the current conservative lending environment. A comment from NAR president Gary Thomas, himself a real estate agent in California, indicated that the trade group’s interpretation leaned toward the latter. “More repeat buyers are using cash in this tight credit environment,” Thomas noted.
Offering cash certainly puts buyers in a strong position when going after prime properties, which are scarce in many areas. Nationally, the supply of listed homes is 5% lower than a year ago, with just 2.28 million homes — representing a 5.1-month supply — available for purchase. As a result, new and properly priced listings move quickly — the NAR reports that 45% of the homes sold in July were on the market for less than a month.
Typically, tight inventory is a self-correcting situation, as rising prices goad potential sellers to list their homes. However, in many submarkets, demand is high enough that even new listings are being rapidly absorbed by eager buyers. As a result, many market watchers track not just the number of properties for sale, but the amount of time it would take those properties to be absorbed at current rates of demand.
By that measure — “months of available supply” — many regional markets are still unusually tight. In Atlanta, for example — which has seen housing prices increase by 19% year-over-year — the supply of properties recently available through the Multiple Listing Service was 3.6 months’ worth, according to a report by Metrostudy released earlier this month.
And at the extreme end of “nothing to buy,” according to a report in the Seattle Post-Intelligencer, in Seattle, the supply was down to 1.5 months’ worth in July, a drop from 1.6 months the month before.