Posted On August 25, 2017
Mortgage rates did not move significantly this week, hovering year-long lows. The Federal Housing Finance Agency (FHFA) house price index appreciated. New home sales and existing home sales each declined amid low housing inventory and a competitive housing market.
The FHFA house price index tracks changes in the value of homes financed through conventional financing securitized by Fannie Mae and Freddie Mac. Home prices rose 0.1% from May to June, 1.6% quarter-over-quarter, and 6.2% year-over-year. FHFA senior economist William Doerner explained in a statement, “the tight inventory is a major explanation for why house prices have been increasing every quarter over the last six years.”
In July, new home sales dropped 9.4% month-over-month and 8.9% year-over-year to a seasonally adjusted level of 630,000. The median sales price increased 6.3% year-over-year to $313,700. At the current sales pace, it would take 5.7 months to exhaust all supply.
Existing home sales also dropped in July, though less substantially than new home sales. Existing home sales are down 1.3% month-over-month, but up 2.1% year-over-year to a seasonally adjusted annual rate of 5.44 million. The median sales price is up 6.2% year-over-year, to a level of $258,300. Inventory is down 9% since last year, and at the current sales pace, it would take 4.2 months to exhaust all available inventory.
Slowed post-Recession construction activity has hurt new home inventory and many Baby Boomers and seniors are choosing to stay in their homes rather than downsizing, hurting existing home inventory. However, millennials and first-time home buyers may reinvigorate the market. In July, first-time home buyers made up 33% of the market share, getting closer to the historical 40% market share they used to make up.