From a small northwestern observatory…

Reuter’s reported this morning that sales of existing homes are down and prices are up.  Economists had forecasted an increase year-over-year of 0.6%, according to National Association of Realtors statistics, which would have been a pretty good jump.  In fact, sales actually fell by 2.2% from June, 2017 to June, 2018.

Sales rose in the northeast and Midwest, but fell in the west and south.  Existing home sales make up about 90% of the market (the other 10% from new homes).  As we’ve reported before, rising costs and lack of infrastructure are driving up new home prices and driving down new home availability.  This means that demand drives up prices, and ultimately drives down volume.  (This was the part of the supply/demand equilibrium lecture that drove so very many college freshmen to major in something other than economics.)  Annual wage growth has been stuck below 3% for some time now, and median house prices are now up 5.2% from last year, to a record high of $276,900.  According to NAR, this is the 76th consecutive month with year-to-year price gains.

Supply at the lower end of the market — starter homes and rental homes — dropped by 18% from last year.  This is problematic since first-time buyers accounted for 31% of all transactions in June.  However, economists estimate that in a healthy market, first-time buyers would account for a 40% market share.  All in all, these are not the signs of a healthy housing market.