Even as total U.S. existing-home sales rose for third straight month, fewer first-time home buyers were able to jump into the market, according to the latest report from the National Association of Realtors.
Existing-home sales increased 2.0 percent in July to a seasonally adjusted annual rate of 5.59 million, up from a downwardly revised 5.48 million in June. Compared with last year, sales are up 10.3 percent and are now at an eight-and-a-half year high. Sales have risen on a year-over-year basis for the past 10 months.
The median home price rose to $234,000, up 5.6 percent from July 2014. Prices have now increased on a yearly basis for the last 41 consecutive months. The number of existing-homes on for sale fell during July however, sinking 0.4 percent to 2.24 million properties. At the current sales pace, that represents a 4.8-month supply. Total inventory is down 4.7 percent from last year.
“Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand,” said NAR chief economist Lawrence Yun. “Realtors in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains.”
And those concerns have already started to affect potential first-time home buyers. Just 28 percent of all buyers were first-timers in July, a decline from 30 percent in June and the smallest share in six months.
“The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face,” said Yun. “Rising rents and flat wage growth make it difficult for many to save for a down payment, and the dearth of supply in affordable price ranges is limiting their options.”
During the same time, mortgage guarantor Freddie Mac reported that interest rates rose, potentially scaring some buyers away. The average rate on a 30-year fixed rate mortgage, excluding fees, increased to 4.05 percent in July, up from 3.98 percent the month before.