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Existing-Home Sales Slip, But Prices Stabilize
Wednesday, July 20, 2011 - Existing-home sales eased in June as contract
cancellations spiked unexpectedly, although prices were up slightly, according to the
National Association of REALTORS®.
Sales gains in the Midwest and South were offset by declines in the Northeast and
West. Single-family home sales were stable while the condo sector weakened.
Total existing-home sales, which are completed transactions that include single-
family, townhomes, condominiums and co-ops, declined 0.8 percent to a seasonally
adjusted annual rate of 4.77 million in June from 4.81 million in May, and remain
8.8 percent below the 5.23 million unit level in June 2010, which was the scheduled
closing deadline for the home buyer tax credit.
Lawrence Yun, NAR chief economist, said this is an uneven recovery. “Home sales
had been trending up without a tax stimulus, but a variety of issues are weighing on
the market including an unusual spike in contract cancellations in the past month,”
he said. “The underlying reason for elevated cancellations is unclear, but with
problems including tight credit and low appraisals, 16 percent of NAR members
report a sales contract was cancelled in June, up from 4 percent in May, which
stands out in contrast with the pattern over the past year.”
Yun cited other factors in the sales performance. “Pending home sales were down in
April but up in May, so we may be seeing some of that mix in closed sales for June.
However, economic uncertainty and the federal budget debacle may be causing
hesitation among some consumers or lenders.”
The national median existing-home price for all housing types was $184,300 in June,
up 0.8 percent from June 2010. Distressed homes — foreclosures and short sales
generally sold at deep discounts — accounted for 30 percent of sales in June,
compared with 31 percent in May and 32 percent in June 2010.
According to Freddie Mac, the national average commitment rate for a 30-year,
conventional, fixed-rate mortgage was 4.51 percent in June, down from 4.64 percent
in May; the rate was 4.74 percent in June 2010.
Key Issues
NAR President Ron Phipps said home sales should be higher. “With record-high
housing affordability conditions thus far in 2011, we’d normally expect to see
stronger home sales,” he said. “Even with job creation below expectations,
excessively tight loan standards are keeping many buyers from completing deals.
Although proposals being considered in Washington could effectively put more
restrictions on lending, some banking executives have hinted that credit may return
to more normal, safe standards in the not-too-distant future, but the tardiness of
this process is holding back the recovery.”
Phipps added that lower mortgage loan limits, due to go into effect on Oct. 1, already
are having an impact. “Some lenders are placing lower loan limits on current
contracts in anticipation they may not close before the end of September. As a
result, some contracts may be getting cancelled because certain buyers are unwilling
or unable to obtain a more costly jumbo mortgage,” he said.
Total housing inventory at the end of June rose 3.3 percent to 3.77 million existing
homes available for sale, which represents a 9.5-month supply at the current sales
pace, up from a 9.1-month supply in May.
All-cash transactions accounted for 29 percent of sales in June; they were 30
percent in May and 24 percent inJune 2010; investors account for the bulk of cash
purchases.
First-time buyers purchased 31 percent of homes in May, down from 36 percent in
May; they were 43 percent in June 2010 when the tax credit was in place. Investors
accounted for 19 percent of purchase activity in June, unchanged from May; they
were 13 percent in June 2010.
The balance of sales was to repeat buyers, which were a 50 percent market share in
June, up from 45 percent in May, which appears to be a normal seasonal gain.
Single-family home sales were unchanged at a seasonally adjusted annual rate of
4.24 million in June, but are 7.4 percent below a 4.58 million pace in June 2010. The
median existing single-family home price was $184,600 in June, up 0.6 percent from
a year ago.
Existing condominium and co-op sales fell 7.0 percent to a seasonally adjusted
annual rate of 530,000 in June from 570,000 in May, and are 18.0 percent below the
646,000-unit level a year ago. The median existing condo price5 was $182,300 in
June, up 1.8 percent from June 2010.
Regional Performance
Existing-home sales in the Northeast fell 5.2 percent to an annual pace of 730,000 in
June and are 17.0 percent below June 2010. The median price in the Northeast was
$261,000, up 3.1 percent from a year ago.
Existing-home sales in the Midwest rose 1.0 percent in June to a pace of 1.04 million
but are 14.0 percent below a year ago. The median price in the Midwest was
$147,700, down 5.3 percent from June 2010.
In the South, existing-home sales increased 0.5 percent to an annual level of 1.86
million in June but are 5.6 percent belowJune 2010. The median price in the South
was $159,100, down 0.1 percent from a year ago.
Existing-home sales in the West declined 1.7 percent to an annual pace of 1.14
million in June and are 2.6 percent below a year ago. The median price in the West
was $240,400, up 9.5 percent from June 2010.