Home Sales Slip but Prices Continue to Roll at Double-Digit Rates
Existing-home sales declined in June but have stayed well above year-ago levels for the past two years, while the median price shows seven straight months of double-digit year-over-year increases, according to information released Monday by the National Association of Realtors®.
 
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dipped 1.2 percent to a seasonally adjusted annual rate of 5.08 million in June from a downwardly revised 5.14 million in May, but are 15.2 percent higher than the 4.41 million-unit level in June 2012.
 
Lawrence Yun, NAR chief economist, said there is enough momentum in the market, even with higher interest rates. “Affordability conditions remain favorable in most of the country, and we’re still dealing with a large pent-up demand,” he said.
 
However, my estimate suggests we have already overcompensated and are facing a housing shortage to the tune of 900,000 million. That is, cumulatively from 2001 to 2012, there were 15.7 million housing starts, while household formation along with the need to replace demolished units created demand for 16.8 million units (2001 was chosen for the beginning year since it was a non-eventful and very normal year for the housing market). Furthermore, if household formation is 1 million in 2013 along with 300,000 demolished/uninhabitable units and 100,000 in new demand for vacation homes this year — a reasonable and conservative assumption — then it will take 1.4 million housing starts just to meet the new demand this year without solving the previously accumulated shortage. This year’s consensus economist forecast on housing starts estimate is around 1 to 1.1 million. Consequently, the housing shortage is likely to worsen, sustaining robust price growth through the end of 2013.
 

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