The Housing Market's 'Jekyll-and-Hyde Month'

IRVINE, CA—Calling it “another Jekyll-and-Hyde month” for the residential market, Auction.com's Rick Sharga points out that although June saw the best results for existing home sales since before the downturn, and also set a new high for median prices, the month's news was not all positive. In the July Housing Round-up posted this past Friday,  Sharga points to the under-representation of first-time homebuyers, citing this as one reason why homeownership rates continue to fall, reaching lows not seen since the 1960s.

Furthermore, sales of new homes did not fare as well. And the National Association of Realtors followed up its positive report on existing-home sales with the news that pending sales declined slightly in June from the previous month.

“The housing market continues to lurch forward, occasionally making a sideways or backwards step, gradually making its way to a full recovery,” says Sharga, EVP with the GlobeSt.com Thought Leader. “But we're likely to end 2015 selling about 1.5 million fewer new and existing homes than our population and demographics would suggest.”

With factors ranging from a lack of available inventory to tight credit, Sharga says the recovery is “in motion, but moving much more slowly than most of us would like.”

And he sees “one more storm cloud on the horizon” in the form of affordability. “As home prices continue to rise, significantly outpacing wage growth, more and more markets are becoming too expensive for first-time buyers to enter,” Sharga says. This, he adds, “effectively causes the whole homebuying engine to seize up.”

Finally, there's the prospect of an interest rate increase from the Federal Reserve, perhaps as early as the fall. “If mortgage rise by as little as a point while home prices continue to go up, the slow-but-steady recovery we've been watching may suddenly take a turn for the worse,” Sharga cautions.

Among June's positives, Sharga cites a decline in distressed sales, which accounted for just 8% of June's total. Meanwhile, Auction.com's most recent Real Estate Nowcast, prepared after the NAR issued its report on existing home sales, called for June's momentum to carry forward into July. The firm predicted that sales prices for existing homes would fall between $227,170 and $251,082 in the month of July, with a targeted price of $239,126. That would represent a 4.6% month-over-month increase, and would set another record for median home prices.