Existing home sales fell 2.4 percent in June, but chief economist Lawrence Yun’s view on the numbers goes deeper than the sales figures. He says the market hasn’t been this stuck since 2008 and there hasn’t been a foreclosure crisis to explain it.
Sales of existing homes have been within a narrow bandwidth for almost four years. The only other time that happened was bankruptcies flooding the market. This time, however, that’s not the case, according to Lawrence Yun, chief economist for the National Association of Realtors.
The comparison came as NAR published the report on sales of existing homes in June Thursday showed sales fell 2.4 percent from May to a seasonally adjusted annual rate of 4.09 million, even as the average price hit a record $440,600. In addition to the top numbers, Yun made a series of observations during a call with reporters that add context to the report.
A recession without a crisis
Existing home sales have remained within a range of 3.9 million to 4.2 million for 36 of the past 38 months, Yun said, a period he said has only happened once before.
Lawrence Yun
“We are in the fourth year of these 4 million homes sold,” Yun said. He said the only other time sales were close to 4 million That’s how long it was during the recession and foreclosure crisis of 2008, after which sales remained below 4 million for four years and then topped 5 million per year for the next eleven years.
Unlike 2008, Yun says, the current slump isn’t caused by distressed properties; foreclosures and short sales accounted for just 2 percent of transactions in June, near an all-time low. “It makes you wonder how long home sales can stay stuck around 4 million,” he said.
The number of transactions may be frozen, but the dollar figures are not, Yun said: Total dollar sales volume has surpassed pre-pandemic levels, even as the number of homes changing hands remains below pre-pandemic levels. He attributed the difference to home prices being 50 percent higher than before the COVID-19 pandemic.
Record prices, a story with two sides
“Is this good news, like the stock market, or bad news, like grocery prices?” Yun asked about June’s record average price. Record high prices are “good news for existing homeowners – it is their housing equity,” he said, “while the news is bad for potential home buyers, especially renters looking to buy their first home.”
NAR’s Housing Affordability Index improved to 102.3 in June from 95.5 a year earlier, a gain the association attributed to wage growth outpacing home price growth. But Yun said the monthly index is near its lowest level since last summer as June marks the seasonal peak for home prices — what he called the “bread-and-butter month” for real estate.
“Without a doubt, affordability is a major challenge for people who want to become homeowners, and that is why we need more supply,” said Yun, who called for converting vacant commercial buildings into housing and reducing regulatory burden on builders.
Where the profits land
Yun said price gains are concentrated at the top of the market: Sales of homes priced below $100,000 fell year-over-year, while sales of homes priced above $1 million rose 18 percent. He said the luxury market is giving the average price “a slight upward tilt,” although homes above $1 million still account for less than 10 percent of sales.
Yun also called June’s 1.3 percent year-on-year inventory growth “minuscule,” saying the market needs 30 to 40 percent growth to ease supply constraints.
What Yun sees behind the numbers
Yun said he has noticed a pattern in NAR’s monthly data: Previous months’ figures keep getting revised upwards as later transactions are reported. “It’s the economist’s little lopsided thing that we’re watching,” he said, adding that the pattern suggests late-arriving data tends to come from a stronger market than the initial numbers reflect.
He also addressed why the June sales decline appears to contradict previous current sales figures, which pointed to a profit. Closings represent “actual economic activity” — mortgages issued, trucks loaded — while ongoing contracts are “just an indication of what could happen,” as some contracts don’t go through before closing, Yun said.
Yun pointed to lockbox data, a proxy for how often agents show homes to clients, as one of the first signals of NAR tracks. Lockbox openings in June were unchanged from a year earlier, he said, after several months of gains.
Yun also cited a New Jersey listing priced at just over $1 million that sold for $500,000 above asking price. He called it anecdotal, but said it reflects the bidding wars still playing out in supply-constrained Northeast markets, including New Jersey, Connecticut and Massachusetts.
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