‘Severe’ Housing Shortage Hits US home sales, Lifts Prices

Article originally posted on Phoenix Business Journal on July 24, 2018

Image result for Sales of previously owned U.S. homes fell for the third-straight month in June and prices struck a record high amid a “severe housing shortage,” according to the National Association of Realtors, but conditions may slightly improve this summer as new construction adds supply. KATHLEEN LAVINE, BUSINESS JOURNAL

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Sales of previously owned US homes fell for the third-straight month in June and prices struck a record high amid a “severe housing shortage”, according to data released on Monday.

Existing home sales fell 0.6 per cent in June to an annualised rate of 5.38m units, according to the National Association of Realtors. The key gauge of the US housing market was down 2.2 per cent from the same month in 2017.

There was a mismatch between demand among would-be homebuyers and “the actual pace of home sales, which are declining”, said Lawrence Yun, chief economist for the NAR.

“The root cause is, without a doubt, the severe housing shortage that is not releasing its grip on the nation’s housing market. What is for sale in most areas is going under contract very fast, and in many cases has multiple offers,” he said.

The lack of supply and robust demand sent the median existing-home price to $276,900 in June, up 5.2 per cent year on year, setting a new high.

Freddie Mac, the US-government backed mortgage financier, cited the same trends in its July housing market report, also issued on Monday. “Exceptionally low housing supply and weaker affordability slowed the housing market in the first half of 2018,” it said.

The group believes that conditions will “slightly improve” going into the late summer, “with added new home construction helping to alleviate some of the current supply shortage”. It forecast a 2.5 per cent increase this year in total home sales, which includes both existing homes and newly built ones, with prices rising 6.7 per cent.

Demand in the housing market has been boosted by a labour market and broader economy that are firing on all cylinders. The jobless rate was 4 per cent in June, close to an 18-year low, according to official data.

Meanwhile, figures later this week are forecast to point to an acceleration in US gross domestic product growth to an annualised rate of 4 per cent for the second quarter, a sharp acceleration from the 2 per cent recorded in the first three months of this year.