WASHINGTON: US home sales increased by the most on record in June, boosted by historically low mortgage rates, but the outlook for the housing market is being clouded by low inventory and high unemployment amid the Covid-19 pandemic.
The report from the National Association of Realtors on Wednesday, which also showed house prices rising to an all-time high last month, confirmed a shift toward bigger homes and properties away from urban centers as companies allow employees flexibility to work from home because of the coronavirus.
The upbeat housing market news was overshadowed by a relentless surge in new Covid-19 infections, which has prompted some authorities in the hard hit South and West regions to either shut down businesses again or pause reopenings, threatening the economy's recovery from the Covid-19 slump.
Existing home sales jumped 20.7% to a seasonally adjusted annual rate of 4.72 million units last month. The percentage gain was the largest since 1968 when the NAR started tracking the series. Sales plunged to a 3.91 million unit pace in May, the lowest level since October 2010.
June's increase ended three straight months of decreases, though home resales remained 18% below their pre-pandemic level. Economists polled by Reuters had forecast sales rebounding 24.5% to a rate of 4.78 million units in June.
Existing home sales, which make up about 85% of US home sales, fell 11.3% on a year-on-year basis in June.
The 30-year fixed mortgage rate is at an average of 2.98%, the lowest since 1971, according to data from mortgage finance agency Freddie Mac. Data last week showed homebuilding increased in June by the most in nearly four years.
A separate report on Wednesday from the Mortgage Bankers Association showed applications for loans to purchase a home increased 2% last week from a week earlier. The economy slipped into recession in February. A staggering 32 million Americans are collecting unemployment checks.
Home sales rose surged in all four regions last month. Demand for housing was skewed toward single-family homes, mostly in the suburbs and smaller towns, with people seeking large spaces for home offices and schooling.
Single-family home sales advanced 19.9% in June. While multi-family home sales shot up 29.4%, they accounted for only 9% of sales, down from the 12% that is considered the norm for the housing market.
There were 1.57 million previously owned homes on the market in June, down 18.2% from a year ago. The median existing house price increased 3.5% from a year ago to a record $295,300 in June. The NAR attributed the modest percentage gain to sales being concentrated in the more affordable markets in the South.
At June's sales pace, it would take 4.0 months to exhaust the current inventory, down from 4.3 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.