Momentum Slips in Housing Market

June’s Residential Nowcast shows the US housing market “remains on solid footing,” says Ten-X’s Peter Muoio.

IRVINE, CA—Following what the National Association of Realtors reported as a year-over-year decline in pending home sales for May, Ten-X’s latest Residential Real Estate Nowcast projects existing home sales to remain “fairly range-bound” in June. The Nowcast, results of which were released on Thursday, predicts existing home sales for this month will fall between seasonally adjusted annual rates of 5.38 and 5.74 million, with a targeted number of 5.56 million. That represents a 0.5% increase from May and a 1.4% Y-O-Y gain. “Despite facing broader economic headwinds following a disappointing May jobs report, slowing US GDP growth and uncertainty in global markets, the US housing market remains on solid footing,” says Peter Muoio, chief economist with Ten-X. “We continue to hold a positive outlook for housing supported by accelerating wage growth, an accommodative labor market and low interest rates, though persistent issues with declining affordability and low inventory will likely limit stronger gains in sales.” Although May’s pending home sales slipped 3.7% on a Y-O-Y basis for the first time in nearly two years, NAR also reported that existing home sales for the month rose 4.5% from the year-ago period to an annualized 5.53 million units in May. That represented a 1.8% gain from a downwardly revised 5.43 million rate in April and marked the highest annual sales rate since February 2007. Similarly, last month’s Ten-X Residential Real Estate Nowcast also called for an increase in May sales between 5.47 and 5.83 million units, with a target of 5.65 million. NAR also reported a 4.7% Y-O-Y increase in median existing home prices to $239,700 for May. It represented the 51st consecutive month of annual gains and nearly matched the prediction of $238,418 that Ten-X made in the nowcast for May. Findings from the Ten-X Residential Real Estate Nowcast now suggest that sales prices for existing homes will fall between $231,642 and $256,025 for June with a targeted price of $243,833. It would mean a 1.7% month-over-month and 3.1 percent Y-O-Y gain. NAR’s report for the month will be issued in late July. “It will be interesting to see if the recent Brexit vote will have a measurable near-term impact on the US housing market,” says Rick Sharga. “We could see interest rates reach a new low, possibly stimulating buying activity by improving affordability. Or we could see an influx of foreign capital, as investors look towards US real estate in a flight to safety. Either of these could significantly change the current market trajectory.” At NAR, chief economist Lawrence Yun says the fallout from the UK’s decision to leave the European Union breeds both immediate opportunity as well as potential headwinds for the US housing market. “In the short term, volatility in the financial markets could very likely lead to even lower mortgage rates and increased demand from foreign buyers looking for a safer place to invest their cash,” says Yun. “On the other hand, any prolonged market angst and further economic uncertainty overseas could negatively impact our economy and end up tempering the overall appetite for homebuying.”