Existing Home Sales Fall 3.5% – Prices Slip Again

The National Association of Realtors^{®</supreported today that existing-home sales in July were down from the previousrnmonth but were significantly higher than a year earlier. Existing home salesrninclude completed transactions on single-family homes, townhomes, condominiums,rnand cooperative apartment.  Thernannualized rate of existing home sales fell to 4.67 million in July from 4.84rnmillion in June, a drop of 3.5 percent.  The June figure was significantly revisedrnupward in this month’s report from an earlier estimate of 4.77 million.   ThernJuly number is a 21.0 percent increase from July 2010 which NAR described as arncyclical low period following the expiration of the home-buyer tax credit.</p}

Lawrence Yun, NAR chief economist, said there is a tug andrnpull on the market.  “Affordability conditions this year have been thernmost favorable on record dating back to 1970, but many buyers are being heldrnback because banks are offering financing to only the most highly qualifiedrnborrowers, ignoring a large share of otherwise creditworthy buyers,” hernsaid.  “Those potential buyers represent the difference between an unevenrnrecovery and a much more robust housing market that could stimulate additionalrneconomic activity and create jobs.”</p

As was the case inrnJune, contract failures in which a pending sale is cancelled because of declinedrnmortgage applications, low appraisals, or other problems were reported by 16rnpercent of NAR members.  In addition, 9 percent of Realtors^{®</supreport a contract was delayed in the past three months due to low appraisals,rnand another 13 percent said a contract was renegotiated to a lower sales pricernbecause an appraisal was below the initially agreed price.</p}

NAR President RonrnPhipps, broker-president ofrnPhipps Realty in Warwick, R.I., said an unacceptably high number of potentialrnhome buyers are unable to complete transactions.  “For both mortgage credit and home appraisals, there’s beenrna parallel pendulum swing from very loose standards which led to the housingrnboom, to unnecessarily restrictive practices as an overreaction to the housingrncorrection,” he said.</p

The median price for allrnexisting homes was $174,000, down 4.4 percent from one year earlier.  Approximately 29 percent of all sales in Julyrnwere of distressed homes either from foreclosure sales, real estate owned byrnlenders, or short sales compared to 30 percent last month and 32 percent onernyear earlier.  These often deeplyrndiscounted sales continue to put downward pressure on housing prices.  </p

Single-family homernsales declined 4.0 percent to a seasonally adjusted annual rate of 4.12 millionrnfrom 4.29 million but were 21.5 percent higher than the annual rate of 3.39rnmillion in July 2010.  The medianrnexisting single-family home price was $174,800, down 4.5 percent from a yearrnago.  Condominium and co-op sales werernunchanged from June’s rate of 550,000 and are 17.3 percent above sales a yearrnago.  The median price for a condo wasrn$168,400, a 4 percent decrease year-over-year. </p

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First time buyers were responsible for 32rnpercent of sales, up one percentage point since June with repeat homebuyersrnaccounting for 50 percent and investors 18 percent.  Investors accounted for most of the 29rnpercent of sales that were all-cash transactions.  All of these figures are essentiallyrnunchanged both year-over-year and month-over-month.</p

Total housing inventory was down 1.7 percent atrnthe end of the month with 3.65 million existing homes available for sale, a 9.4rnmonth supply at the current pace of sales. rnIn June the inventory represented a 9.2 month supply. at the end of Julyrnfell 1.7 percent to 3.65 million existing homes available for sale, whichrnrepresents a 9.4-month supply⁴ at the current sales pace, up from arn9.2-month supply in June.</p

On a regional basis, sales in the Northeast andrnthe Midwest were up while the South and West declined.  The Northeast’s annual rate rose 2.7 percentrnto 750,000, a 19 percent increase since last year while the Midwest increased 1rnpercent to a pace of 1.05 million, 31.1 percent higher than July 2010.  The median price in both regions alsorndeclined year-over-year; in the Northeast prices were down 6.8 percent to $245,600rnwhile the Midwest dropped 2.9 percent to $146,300.  </p

In the South existing-home sales declined 1.6rnpercent to a rate of 1.84 million in July but are 19.5 percent above sales in Julyrn2010.  Sales in the West sales were down 12.6rnpercent to an annual pace of 1.04 million in July; this was 6.9 percent higherrnthan a year ago.  The median price in the West was $208,300 down 7.1rnpercent and in the South the median was $152,600, 2.2 percent below a year ago.

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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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