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US: Existing Home Sales Continue to Disappoint, Decline for the Third Straight Month in June

Existing home sales disappointed expectations again, falling 0.6% to 5.38 million in June from a slightly downwardly-revised 5.41 million in May. Economists had expected a slight uptick of 0.2% in June.

The pullback was again concentrated in the single-family segment, where sales fell by 0.6% on the month to 4.76 million, marking the third consecutive monthly decline. Meanwhile, sales of condos and co-ops were flat on the month at 620k.

Activity was mixed across the country. Sales continued to fall in the South (-2.2% m/m) and West (-2.6%), with both extending their losing streaks to four straight months. On the other hand, activity improved in the Midwest (+0.8%) and Northeast (+5.9%) – the latter coming on the back of a healthy gain in the prior month after subdued activity in the first quarter.

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The number of homes available for sale rose 4.3% to 1.95 million in June, up slightly (+0.5%) from a year ago, but is still quite low relative to current demand levels. Homes listed for sale continued to be snapped up quickly, spending just 26 days on the market – the same as the last three months but down 2 days from a year ago. Given this dynamic, median home prices continued to rise at a brisk pace, with price growth accelerating to 5.2% y/y in June from 5.0% in the month prior.

Today’s data for June brings the second quarter to a close, with activity falling 1.7% on a quarter-on-quarter basis, the fourth such decline in the past five quarters.

Key Implications

While the report did include a few bits of positive information, such as rebounding activity in the Northeast and improved inventory levels which are up for the first time year-over-year since mid-2015, altogether this is undoubtedly another disappointing housing report with existing home sales extending their losing streak to three straight months.

There are few signs of a turnaround in the near-term, with the June print providing a weak handoff to third quarter activity. Moreover, a weakening trend in pending home sales suggests that the soft prints are likely to continue.

Looking further ahead, the housing market will continue to face headwinds on both the supply and demand side. An improving economy, which is at or near full employment and is generating upward pressure on wages, should help households to continue to overcome the challenges of rising prices and higher interest rates. On the other hand, builders are facing bigger challenges, such as rising material costs (partly due to recent tariffs) and labor shortages, that are likely to continue to hold back supply and thus remain the determining factor over the evolution of the housing market over the medium term.

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