Home resales in the U.S. fell more than real estate analysts expected in June, but a lack of properties and strong demand pushed prices even higher. Unfortunately, this national phenomenon is keeping first-time homebuyers out of the market.
For the last two years, the housing market has experienced a shortage of homes for sale. Some home builders are struggling to find affordable land and building materials, while many young and middle-income buyers are simply being priced out of the market.
In short, it’s a great time to be selling a home, but a difficult time to buy.
However, many economists say that is actually a sign of a strong economy.
“The fact that demand is so high is actually a good sign of economic health. But that’s probably small comfort to buyers, especially first-time buyers that are having an especially difficult time finding entry-level homes for sale,” said Zillow’s chief economist Svenja Gudell.
The National Association of Realtors, or NAR, said recently that existing home sales dropped 1.8%, giving them an annual rate of 5.52 million homes. This rate is adjusted seasonally.
Earlier, economists forecasted that sales would fall just 1% to around 5.58 million homes, given that sales were up nearly 0.7% from last June. The housing shortage has led to bidding wars and increased the price of the average home, which is currently outpacing the wage gains experienced by the workforce.
There were nearly 1.96 million houses on the market last month, a decrease of 7.1% when compared to the year prior — and this has been the 25th month straight that the housing inventory has dropped.
The median house price, in contrast, saw a 6.5% increase from a year ago, raising it to a high of $263,800. This is the 64th straight month that the average price has increased.
The NAR believes that this is not an indication of another housing market bubble, however. They noted that the inflation-adjusted median price was still below the peak in 2006, which contributed to that particular bubble.
Because of the fast rising home prices, many young buyers are either giving up and renting or looking for financial assistance. For veterans, the VA loan program has already helped more than 22 million veterans get homes, while young couples can apply for a number of special grants and loan programs.
Despite the difficulties faced by homebuyers this year, so far demand is holding strong.
“Housing demand should hold up. However, we are not optimistic that the current inventory shortage will improve this year,” said Matthew Pointon, property economist at Capital Economics in New York. “Existing home sales will do no more than tread water over the next few months.”