Existing-home sales, which fell 1.7% in June, have been slumping year-over-year for 16 consecutive months.
U.S. home sales slumped in June as home prices for major West Coast cities declined for the first time since 2012, ending the spring selling season with a thud.
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 the 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.
While price declines are concentrated on the West Coast, other costly markets such as New York, Boston and the Denver area are also weakening.
At the Whit Harvey Group, we have noticed a drop off in buyers for the million plus homes here in Baltimore. The 2017 overhaul of the federal tax code that capped the deduction for state and local taxes at $10,000 and reduced the limit for the mortgage-interest deduction has definitely decreased demand for more expensive homes.
This article is excerpted from the Wall Street Journal, by Laura Kusisto, Will Parker and Abigail Summerville.