Auction.com Sees Home Sales Pace Continuing

IRVINE, CA—On the heels of the National Association of Realtors' report Wednesday of a successful month for existing home sales, Auction.com is projecting a seasonally adjusted annual rate between 5.49 million 5.84 million for July. The midway point of that range, 5.67 million, represents a 3.2% increase over June and an 11.7% rise from a year ago.

“May and June existing home sales have both been very encouraging for anyone looking for proof that the housing market is in recovery,” says Rick Sharga, EVP at Auction.com. “Our July nowcast indicates that this positive momentum will continue into July.”

NAR's report for June, which also corresponded closely to Auction.com's projection of existing home sales for the month, cited a 6.5% year-over-year increase in median prices for existing homes. At $236,400, it beats the previous all-time high of $230,400 set in July 2006.

This means that from a price perspective, the housing recovery has shifted to an expansion, says Auction.com. The figure was comfortably within the range of $217,482 and $240,375 that Auction.com predicted last month.

For July, the firm is projecting that sales prices for existing homes will fall between $227,170 and $251,082, with a targeted price of $239,126. This would represent a 4.6% month-over-month increase and 7.7% Y-O-Y, and would set another record for median home prices.

One potential area of concern, Sharga says, is “the steeper-than expected increase in home prices. While this is driven by limited inventory, and a declining number of distressed home sales, affordability may start to become an issue if home price increases continue to outpace wage growth. And if the Fed does move to raise interest rates as expected this fall, we could see home sales volume begin to weaken.”

Although the percentage of first-timers among homebuyers slipped slightly to 30% in June from 32% in the previous month, it remains higher than it was earlier in the recovery. “First-time homebuyers will continue to be challenged in an environment with limited entry level inventory, tight credit and rapidly-rising prices,” says Sharga.

Additionally, all-cash sales, which provide the best indicator of true investor purchases, continued to drop. In June, they represented 22% of sales, down from 24% in May and 32% a year earlier. 

“This is not surprising given the big increases in prices that are making return hurdles harder and harder to meet,” says Auction.com's chief economist, Peter Muoio. “This is the lowest level of all-cash sales since December 2009. Similarly, distressed sales accounted for just 8% of June's transactions, matching an August 2014 low. “Taken together these indicators signify a housing recovery on more solid ground, with fickle investors playing a smaller role, the vast majority of sales non-distressed, prices back to pre-bust levels and sales increasing sharply,” Muoio says.