Mortgage rates have been falling all year, but that hasn’t translated into increased home sales. As a matter of fact, single-family home sales dropped by 0.5% month over month in June. The reason: a lack of inventory.
There simply aren’t enough homes to go around, according to a new housing report by Capital Economics. Rates have been hovering at just over 4% for the past month, and are expected to drop to 3.8% in the next couple of weeks – but home sales are still down. In addition to the 0.5% month-over-month drop, sales were down 1% annually in June, according to Capital Economics.
“It doesn’t look like tougher mortgage lending standards are behind the disconnect,” the report said. “While credit scores on newly approved mortgages are rising, the closing rate has been stable at around 77% since the start of the year. Rather, a lack of homes for sale helps explain the growing gap between mortgages and sales. Qualifying for a mortgage is of little help if you can’t find a home to buy.”
The number of existing single-family homes was at 1.58 million in June – close to record lows, according to Capital Economics – and the Census Bureau has reported that the national homeowner vacancy rate was at a 40-year low for the second straight quarter. Vacancies are below average in 44 states – and especially tight in Nevada and Missouri, according to Capital Economics.
The lack of inventory, and concomitant subdued home sales, have been good for the multifamily market, at least. According to the Census Bureau, rental households rose by 600,000 in the second quarter – the largest gain in three years. Rental vacancy rates have remained low, with only eight states reporting above-average vacancy rates in Q2, Capital Economics said.