US: Existing home sales to have increased only by about half as much as the pending index - RBS

Research Team at RBS, suggests that they expect the US existing home sales to have increased only by about half as much as the pending index, perhaps edging up to an annualized level of 5.42 million units.

Key Quotes

“More broadly, the market for existing homes has been restrained by a dearth of inventories even as the labor market and mortgage rates have helped lift demand for housing. The inventory situation at the end of July showed inventories standing at 2.13 million units (down 5.8% from last year), and translating into only 4.7 months of supply at the July selling rate. That is well below the 6 months typically associated with a market in equilibrium.

The National Association of Realtors noted in July that, “Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month. Realtors are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows… Although home sales are still expected to finish the year at their strongest pace since the downturn, thanks to a very strong spring, the housing market is undershooting its full potential because of inadequate existing inventory combined with new home construction failing to catch up with underlying demand. As a result, sales in all regions are now flat or below a year ago and price growth isn’t slowing to a healthier and sustainable pace.”