US existing home sales in June surprise on upside; housing activity to stay upbeat this year

Existing home sales in the US surprised on the upside as it rose again in June, following three straight gains. Sales grew 1.1 percent month-on-month to 5.57 million, as compared with market expectations of sales to decline to 5.48 million.

Meanwhile, May’s sales were downwardly revised a bit. June’s rise was the fourth consecutive gain and reached the highest level of the rebound in spite of persistent tight levels of inventory. In the second quarter, home sales averaged 5.50 million units, a rise of 3.8 percent on sequential basis and up 4.2 percent year-on-year.

This indicator is expected to improve further in the coming months as traditional purchasers become active in the market, noted TD Economics in a research note. Moreover, many major banks have announced mortgage programs concentrated on first-time and low- and moderate-income borrowers, providing low down payment requirements. These measures are likely to assist in alleviating certain challenges that first-time buyers face.

The housing activity in the US is likely to continue improving in 2016. Rise in wages, employment and ultra-low mortgage rates will support the improvement, said TD Economics.

The average rate on conventional 30-year mortgages has dropped 0.7 percentage points from a year ago level, and is likely to increase consumers’ appetite for refinancing and new purchases.

Refinancing activity has increased sharply by 27 percent on a four-week moving average basis, showed the MBA index. Meanwhile, the purchases are likely to continue rising; but, improvement is expected to be more gradual as due to the low supply of available houses for sale.

Delving into details of June’s existing home sales, the recovery in the activity was widespread. Single-family homes sales grew 0.8 percent month-on-month to 4.92 million. Condo/co-op segment sales rose 3.2 percent to 650,000.

Growth in home prices expanded on the month. Median prices rose 4.8 percent year-on-year, as compared with the gains of 4.4 percent recorded in May.

Single-family homes values rose 5 percent year-on-year, while, prices for co-ops and condos rose 3.2 percent year-on-year. Of the total, 33 percent of transactions were accounted by first-time homebuyers.

This is an improvement from the 30 percent share registered in May and a year ago. Inventory of available houses of sale continue to be low. It dropped 0.9 percent month-on-month in June to 2.12 million properties.