Sales of existing homes improved for the third consecutive month in June, the National Association of Realtors reported Tuesday in one of several new data points that suggest a steadily better economy.
Total existing home sales jumped 2.6 percent in June to a seasonally adjusted rate of 5.04 million. That improved on a revised May number of 4.91 million. While a welcome improvement, June sales were still 2.3 percent lower than the 5.16 million existing homes sold in June 2013.
“Fed Chair (Janet) Yellen has emphasized housing is an area of softness in the economy but this softness appears to be fading,” said Chris Christopher, director of consumer economics at forecaster IHS Global Insight.
Realtors were pleased with the June numbers.
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“Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country,” Lawrence Yun, chief economist for the Realtors’ group, said in a statement. “This bodes well for rising home sales in the upcoming months as consumers are provided with more choices.”
The price gains referenced by Yun came from the Federal Housing Finance Agency, which reported Tuesday that U.S. house prices rose 0.4 percent in May from the previous month. The FHFA calculates its index using sales price information from mortgages either sold to or guaranteed by Fannie Mae and Freddie Mac. The FHFA revised its April index value to reflect a 0.1 percent monthly price increase, after originally estimating no change.
The FHFA’s U.S. index is 6.5 percent below its April 2007 peak, and is roughly the same as the July 2005 index level.
Deeper in the realtors’ numbers Tuesday, however, was a more nuanced picture.
On the plus side, the midpoint price for the sale of an existing home stood at $223,300, about 4.3 percent higher than June 2013 and the 28th straight month of year-over-year gains in home prices.
Distressed home sales_ foreclosures or sales at a loss to lenders_ comprised 11 percent of June sales. That’s down from 15 percent from the same month of 2013. And the total housing inventory at the end of June rose 2.2 percent to 2.30 million existing homes, unchanged from the prior month.
On the downside, however, the inventory of unsold homes is 6.5 percent higher than a year ago.
And the share of first-time home buyers rose slightly to 28 percent of all sales in June, pretty much where it was for all of 2013 and well below historical averages. All-cash sales were 32 percent of June sales, another number that remains persistently high compared to historical averages. Both of those are signs of continued stress in the housing market because they reflect the difficulty in securing a mortgage and a break in the traditional cycle of first-time buyers trading up.
Stagnant wage growth continues to weigh against stronger home sales, warned Yun, adding that “the lack of wage increases is leaving a large pool of potential home buyers on the sidelines who otherwise would be taking advantage of low interest rates.”
In another sign of economic improvement, the government reported Tuesday that headline inflation_ what consumers pay in restaurants and stores_ held steady at 2.1 percent. Core inflation, which strips out energy and food prices, edged down a tad to 1.9 percent.
Both are on the mark for where the Federal Reserve normally hopes inflation to be. But given how sluggish the economic recovery has been, the Fed right now would like to see more inflation, a sign that the economy is heating up.