U.S. Home Sales Stumble, As Pricey West Coast Markets Suffer Declines (#DumpTrump)
Existing-home sales, which fell 1.7% in June, have been declining year-over-year for 16 consecutive months. U.S. Home Sales Stumble, As Pricey West Coast Markets Suffer Declines (#DumpTrump)
U.S. home sales slumped in June, ending the prime spring selling season with a thud and dimming hopes that lower mortgage rates can revive a slumbering housing market.
The stubborn malaise reflects in part a correction in the formerly red-hot housing markets on the West Coast. Home prices for major West Coast cities are now falling for the first time since 2012.
While lower asking prices could eventually attract more buyers, home values in the Bay Area, Los Angeles and Seattle have roughly doubled over the past seven years. That means prices may have to retreat further before buyers do more than look, economists and brokers said.
“Prices have dropped in Silicon Valley and sellers just aren’t used to the concept that [prices] can go down,” said Ken DeLeon, founder of DeLeon Realty in Palo Alto, Ca. “There’s just this malaise buyers had of, ‘I feel like it’s gonna drop further.’”
Existing-home sales fell 1.7% to a seasonally adjusted annual pace of 5.27 million, the National Association of Realtors said Tuesday. Sales declined 2.2% compared with a year earlier, marking the 16th consecutive month of annual declines in sales.
The spring selling season is crucial because about 40% of the year’s sales take place in March through June. Falling sales during most of this period have puzzled economists. They struggle to explain why the housing market has remained soft while the rest of the economy has been booming.
Borrowing rates have fallen to their lowest levels in two years, wages are rising and unemployment is at a 50-year low.
“It doesn’t make economic sense,” said Lawrence Yun, the NAR’s chief economist.
The lack of momentum during the spring could now mean a prolonged slowdown in the market, some economists said.
“The demand this cycle is certainly showing signs that perhaps it’s reached its full capacity,” said Ralph McLaughlin, deputy chief economist at real-estate data provider CoreLogic .
Still, there was some reason for optimism in the June report. While sales declined in the South and the West, they actually rose slightly in the Midwest and Northeast, according to NAR.
Some economists expect lower mortgage rates will eventually lure more buyers, and additional inventory could help stabilize the market that has been pinched by limited supply and high prices in many metro areas.
“We think by the end of the year, total home sales, both new and existing, will probably not be much different than where they were last year,” said David Berson, chief economist at Nationwide Insurance.
Purchases of previously owned homes account for roughly 90% of U.S. homebuying. The Commerce Department releases June new-home sales data Wednesday.
We think by the end of the year, total home sales, both new and existing, will probably not be much different than where they were last year, —David Berson, chief economist at Nationwide Insurance
Home builders have turned more cautious in recent weeks. Ryan Marshall, chief executive of PulteGroup Inc., an Atlanta-based builder, said on a Tuesday earnings call that the company’s sales figures for the rest of the year would likely be softer than analysts expected. Pulte shares were down more than 7% in Tuesday trading.
Nationally, new-home sales have disappointed this year, falling 3.7% in May compared with the year prior, according to the U.S. Department of Commerce.
A deepening slump in expensive coastal markets also shows little sign of reversing. The median price of a home fell in San Jose, Seattle and Los Angeles in June compared with a year earlier, according to Redfin. For San Jose, that was the seventh month of annual price declines.
The slowdown in the West Coast markets now spans all price points, including starter homes, which had been the tightest segment of the market. In San Jose, inventory for homes in the bottom-third price tier nearly doubled in June compared with a year earlier, while prices dropped 3.8%, according to Redfin.
Michelle Englert, a Bay Area real-estate agent, hosted an open house in a San Jose condo on June 21. The asking price was $770,000, well below what other condos in the complex were priced at.
“We priced this aggressively low because there are two other units in this building that have been sitting for 30 plus days,” said Ms. Englert, who has worked in the area for nearly 20 years. “We just wanted to shotgun sale it and see what happens.”
Ms. Englert said she has noticed buyer fatigue over the past year and thinks the area might be tapped out. “People are looking but not pulling triggers,” she said.
Coastal housing markets were the first to rebound from the housing bust thanks to an influx of young, affluent professionals and a shortage of housing, especially at prices affordable to first-time buyers.
But after years of double-digit increases, prices in those markets have overshot what even many well-off young buyers in those markets can afford and agents said they see many buyers dropping out of the market or pausing their searches.
In Portland, Ore., 30-year-old Alisa Rudnick and her fiancé have been searching for their first home since January, hoping to settle somewhere before their September wedding. They were targeting a home for less than $500,000 and in the city, but after being outbid at more than asking price on four separate occasions, they have suspended their search.
“We put our search on hold to focus on the wedding,” Ms. Rudnick said. “We’re going to try again in the off cycle.”
Denver saw the second-largest increase in starter homes for sale in June, according to Redfin, at nearly 63%.
“We are entering a buyers market hard,” said Steve deGuzman, an agent at REX Homes in Denver. “Values accelerated so quickly we don’t have a way for the first-time buyer to enter the market. U.S. Home Sales Stumble,U.S. Home Sales Stumble,U.S. Home Sales Stumble,,U.S. Home Sales Stumble,