Home sales stumble as pricey West Coast markets see declines
U.S. home sales slumped in June, ending the prime spring selling season with a thud and dimming hopes that lower mortgage rates can revive a slumbering housing market.
The stubborn malaise reflects in part a correction in the formerly red-hot housing markets on the West Coast. Home prices for major West Coast cities are now falling for the first time since 2012.
While lower asking prices could eventually attract more buyers, home values in the Bay Area, Los Angeles and Seattle have roughly doubled over the past seven years. That means prices may have to retreat further before buyers do more than look, economists and brokers said.
“Prices have dropped in Silicon Valley and sellers just aren’t used to the concept that [prices] can go down,” said Ken DeLeon, founder of DeLeon Realty in Palo Alto, Calif. “There’s just this malaise buyers had of, ‘I feel like it’s gonna drop further.’”
Existing-home sales fell 1.7% to a seasonally adjusted annual pace of 5.27 million, the National Association of Realtors said Tuesday. Sales declined 2.2% compared with a year earlier, marking the 16th consecutive month of annual declines in sales.
The spring selling season is crucial because about 40% of the year’s sales take place in March through June. Falling sales during most of this period have puzzled economists. They struggle to explain why the housing market has remained soft while the rest of the economy has been booming.
Borrowing rates have fallen to their lowest levels in two years, wages are rising and unemployment is at a 50-year low.
The lack of momentum during the spring could now mean a prolonged slowdown in the market, some economists said.
“The demand this cycle is certainly showing signs that perhaps it’s reached its full capacity,” said Ralph McLaughlin, economist at real-estate data provider CoreLogic.
Still, there was some reason for optimism in the June report. While sales declined in the South and the West, they actually rose slightly in the Midwest and Northeast, according to NAR.
Denver saw the second-largest increase in starter homes for sale in June, according to Redfin, at nearly 63%.
“We are entering a buyers market hard,” said Steve deGuzman, an agent at REX Homes in Denver.
Real-estate agent Michelle Englert, left, hosts an open house in San Jose, Calif., in June. “People are looking but not pulling triggers,” she said.