Existing home sales rebounded sharply in June from the lows fueled by the pandemic, but will the recovery be sustainable in the long term?

The counts: Previously owned home sales increased 20.7% in June when states reopened their economies following coronavirus-related blockades.

Existing home sales occurred at a seasonally adjusted annual rate of 4.72 million, the National Association of Real Estate Agents reported Wednesday. It was a big rebound from May, when sales fell to the lowest level since July 2010.

“The recovery in sales is strong as buyers were eager to buy houses and properties they had been looking at during the shutdown,” Lawrence Yun, chief economist with the National Association of Realtors, said in the report.

However, compared to last year, existing home sales still fell 11.3% in June.

What happened: Home sales increased in all regions of the country. The West experienced the largest increase with a 31.9% increase last month.

The unsold inventory had a 4-month supply at the end of June, below the 4.8-month supply in May. A 6-month supply of housing is considered indicative of a balanced market. Compared to last year, inventory fell 18.2%.

The low supply of homes for sale raised prices. The median home price in June was $ 295,300, an increase of 3.5% over last year. June was the 100th consecutive month that home prices rose annually.

Big picture: As states reopened businesses after coronavirus-related blockades, Americans rushed to return to the property market, suggesting that many buyers simply delayed buying a home rather than deciding to give up entirely.

Record low mortgage rates added more fuel to the flame, as lower rates helped improve margin affordability and gave buyers one more reason to buy a home.

However, since June there has been an increase in coronavirus cases across the country, particularly in states with some of the largest real estate markets in the US, including California, Texas, and Florida. Experts say the increase in COVID-19 infections will have some impact on the housing market; however, the extent of the impact remains to be seen.

“The recent resurgence in case numbers is likely to affect demand and continue to keep inventory at suppressed levels,” said Rubén González, chief economist at real estate brokerage Keller Williams. “But agents and consumers have now had enough time to adapt to social distancing practices and virtual tools, so the impact on sales may be less than what we saw in April.”

Ultimately, the evolution of the real estate market in the coming months will depend on the strength of the economy in general. An increase in job loss or a wave of evictions could threaten growth in long-term home sales.

Additionally, the limited supply of housing will continue to limit home sales in the future. Lack of inventory is likely to push prices even further, which could force some buyers to leave the market. “Home prices increased during the shutdown and could increase further due to strong competition from buyers and a significant shortage of supply,” Yun said.

What they are saying “Persistent unemployment and languishing confidence could prevent the housing sector from pushing much further than it was before, let alone completely backtracking,” wrote Michael Gregory, deputy chief economist at BMO Capital Markets, in a investigation Note.

Market reaction: The Dow Jones Industrial Average DJIA,
+ 0.61%
and the S&P 500 SPX,
+ 0.57%
both rose slightly on Wednesday morning, while the yield on the 10-year Treasury bond TMUBMUSD10Y,
it was flat.