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US home sales remain elevated but are starting to moderate from their recent peak, according to the most recent addition of the Ten-X Nowcast, and the ongoing inventory shortage is putting a strain on sales growth, particularly as the resulting price gains erode affordability. In addition to these trends, the labor market is adding jobs at a solid rate, unemployment is staying consistently low, wage growth keeps moving forward, and historically low mortgage rates are enticing homebuyers. Ten-X says that these conditions remain supportive of the housing market, despite foreign buying activity cooling due to economic uncertainty abroad, increased regulation, and contention with the strong dollar.
The Nowcast supports their findings with total housing inventory reported by the National Association of Realtors (NAR), which fell 3.3 percent in August to 2.04 million existing homes for sale. Ten-X says that a low inventory of homes is the factor that continues to constrain growth in sales. Despite this, they say that the increasing home prices should still entice homeowners to sell and enable the future inventory level to rise.
More specifically, the report notes that the share of all-cash sales measured 22 percent in August, with individual investors seeing an increase to 13 percent of home purchases in August, up 12 percent from year ago. Additionally, distressed sales (foreclosures and short sales) accounted for 5 percent of total sales in August, a decrease from the 7 percent seen a year ago. Ten-X says that this remains the lowest rate since NAR began tracking the data in October 2008. The steady downward trend of distressed sales of late continues to suggest the housing market is returning towards pre-crisis levels.
The share of first-time buyers declined again to 31 percent in August, due to burdens felt from tight inventory, declining affordability, and an increase in home-flipping. All of these combined to push home prices out of potential homebuyers’ comfort zones.
The Nowcast for September reports that existing-home sales will take another step back from their recent peak, placing September sales in the 5.1 - 5.44 million range, with a targeted rate of 5.27 million. It also reports that median existing-home sales prices in September will fall in the $227,305 - $251,232 range, with a targeted price of $239,268. This represents annual gains of 5.1 percent from last year’s Nowcast and 7.8 percent from last year’s NAR figure, continuing the trend of strong annual price gains.
