Economist's Insights

Existing Home Sales Dropped Unexpectedly as Supply/Demand Tensions Persisted

Jul 23, 2018

Existing home sales fell 0.6% in June, the third monthly decline and disappointing expectations for a modest 0.2% uptick. The 5.38MM-unit pace matched the 2018 low and was near the bottom of the range over the last two years.

The current three-month losing streak, in which sales are down 3.9%, marks the longest stretch since a six-month run that ended in January 2014. That period, plagued by mortgage rates surging in the wake of the infamous taper tantrum, saw total sales drop 9.7%. The details of the current report showed mixed activity across the four major regions. Sales in the Northeast (smallest by volume) were up 5.9% and activity in the Midwest (second by volume) inched 0.8% higher. On the softer side, contract closings dropped 2.6% in the West (third by volume) and 2.2% in the South (largest by volume). Sales in the South were down for a fourth month in a row, the longest downtrend since the 16-month drop that wrapped up in April 2008. The disappointment seems to remain supply driven. The median days a home was listed for sale, reflective of buyer interest, was a brisk 26 days for a third month. That kept pressure on prices with both the median ($276.9k) and average ($314.9k) sales price reaching new record highs. However, there was a silver lining for supply. Inventories grew on a YoY basis for the first time since May 2015 which pushed months’ supply up to 4.3 months, matching the highest since September 2016.