Home sales increased for the second straight month in July.
Existing home sales rose 2% to a seasonally adjusted 5.99 million units in July, from a month earlier, according to the National Association of Realtors (NAR). June total units sold were also revised to 5.78 million. The results outpaced analyst expectations of a decline of 0.5% and 5.83 million units, according to Bloomberg consensus estimates.
“The housing market went through a big swing during the COVID lockdown. Once the economy reopened, now the sector appears to be settling down,” said Lawrence Yun, NAR chief economist, during a press conference announcing the new data.
Before the pandemic, home sales were at about 5.5 million, he said. And sales activity surged for about six months during the pandemic to about 6.5 million units sold. Now sales are under about 6 million units.
The results may be yet another sign that the COVID-induced housing boom could be slowing. Homebuilder confidence tumbled to a 13-month low in July, coming in at a reading of 75, against expectations for the index to be unchanged at 80, according to the NAHB/Wells Fargo Housing Market Index.
Meanwhile, median existing-home price for all housing types in July was $359,900, up 17.8% from July 2020, as each region of the U.S. saw prices climb. This marks 113 straight months of year-over-year gains, but marks a slowdown from the 20% to 29% price growth from a year ago, according to Yun. The median price growth was lifted by more sales of homes above $500,000 in price.
"Lower-end home sales are not clicking as much as upper-end sales," he said. Sales for homes priced $100,000 to $250,000 were down 28%, while sales of homes between $500,000 and $750,000 were up 32% and the sale of homes between $750,000 and $1 million were up 53%.
Housing inventory at the end of July totaled 1.32 million units, up 7.3% from June’s supply and down 12.0% from one year ago. Unsold inventory sits at a 2.6-month supply at the present sales pace, up slightly from the 2.5-month figure recorded in June but down from 3.1 months in July 2020.
"After months of plumbing new lows, for-sale inventory has begun to meaningfully recover in recent months as sellers come out of the woodwork, providing home shoppers with more options, and likely easing some of the upward pressure on home prices in coming months," said Zillow Economist Matthew Speakman in a press statement following the results. "It may not be obvious from the July existing home sales data, but signs are emerging that more balance may slowly be coming back to the housing market, offering homebuyers a bit more to work with in ways that could translate to more home sales in the coming months."
Yun indicated that there are more homes for sale than there were two to three months ago and that he expects inventory levels to increase throughout the year. As more homes become available for sale, record-setting home price growth is expected to subside.
Last month, the S&P CoreLogic Case-Shiller national home price index posted a 16.6% annual gain in May, up from 14.8% in April — marking the highest reading in more than 30 years of data.
“We think a more accurate description of the impact of COVID on the housing market is that it triggered a temporary but massive surge in demand for single-family homes in the suburbs, at a time when inventory already was quite low,” said Pantheon Macroeconomics in a research note prior to the data release. “The result was an explosion in prices. But explosions don’t last long, and as the dust settles it is clear that demand has now returned to its pre-pandemic level.”
Amanda Fung is an editor at Yahoo Finance.