Your Economy (No Politics)

[Bullwinkle]

July Existing-Home Sales Fall To Lowest Level In 15 Years
By James Limbach
ConsumerAffairs.Com
August 24, 2010


Soft sales pace seen continuing for several months in the absence of the homebuyer credit

Sales of previously-owned home were down sharply lower in July following expiration of the home buyer tax credit but home prices continued to gain, according to the National Association of Realtors (NAR).

Existing-home sales -- completed transactions that include single-family, townhomes, condominiums and co-ops -- dropped 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June. Sales were 25.5 percent below the 5.14 million-unit level in July 2009.

Sales are at the lowest level since the total existing-home sales series launched in 1999, and single-family sales -- accounting for the bulk of transactions -- are at the lowest level since May of 1995.

Cautious optimism

NAR Chief Economist Lawrence Yun said a soft sales pace likely will continue for a few additional months. "Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September," he said. "However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.

"Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year," he said. "To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years."

Joel L. Naroff, President and Chief Economist of Naroff Economic Advisors, says It's not clear if the housing market hit a huge air pocket or crashed and burned. But, he says, "for now, this sector looks to be flaton its back."

Naroff sees the latest numbers as illustrative of consumer uncertaintly about the economy. "Unless households and businesses have confidence about the future, they are not going to buy homes or invest regardless of the interest rate," he said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.56 percent in July from 4.74 percent in June; the rate was 5.22 percent in July 2009. Last week, Freddie Mac reported the 30-year fixed was down to 4.42 percent.

Rising home prices

The national median existing-home price for all housing types was $182,600 in July -- up 0.7 percent from a year ago. Distressed home sales are unchanged from June, accounting for 32 percent of transactions in July; they were 31 percent in July 2009.3

"Thanks to the home buyer tax credit, home values have been stable for the past 18 months despite heavy job losses," Yun said. "Over the short term, high supply in relation to demand clearly favors buyers. However, given that home values are back in line relative to income, and from very low new-home construction, there is not likely to be any measurable change in home prices going forward."

Total housing inventory at the end of July increased 2.5 percent -- to 3.98 million existing homes available for sale, which represents a 12.5-month supply at the current sales pace compared with an 8.9-month supply in June. Raw unsold inventory is still 12.9 percent below the record of 4.58 million in July 2008.

A parallel NAR practitioner survey shows first-time buyers purchased 38 percent of homes in July, versus 43 percent in June. Investors accounted for 19 percent of sales in July, compared with 13 percent in June; the balance were to repeat buyers. All-cash sales rose to 30 percent in July from 24 percent in June.

What's selling

Single-family home sales dropped 27.1 percent to a seasonally adjusted annual rate of 3.37 million in July from a pace of 4.62 million in June, and are 25.6 percent below the 4.53 million level in July 2009; they were the lowest since May 1995 when the sales rate was 3.34 million. The median existing single-family home price was $183,400 in July -- 0.9 percent above a year ago.

Single-family median existing-home prices were higher in 11 out of 19 metropolitan statistical areas reported in July in comparison with July 2009 (the price in one of 20 tracked markets was not available). However, existing single-family home sales fell in all 20 areas from a year ago.

Existing condominium and co-op sales fell 28.1 percent to a seasonally adjusted annual rate of 460,000 in July from 640,000 in June, and are 24.0 percent below the 605,000-unit level in July 2009. The median existing condo price5 was $176,800 in July, down 1.7 percent from a year ago.

Where they're selling

Regionally, existing-home sales in the Northeast dropped 29.5 percent to an annual pace of 620,000 in July and are 30.3 percent lower than a year ago. The median price in the Northeast was $263,800, up 4.8 percent from July 2009.

Existing-home sales in the Midwest fell 35.0 percent in July to a level of 800,000 and are 33.3 percent below July 2009. The median price in the Midwest was $151,600, down 2.8 percent from a year ago.

In the South, existing-home sales dropped 22.6 percent to an annual pace of 1.54 million in July and are 19.8 percent below a year ago. The median price in the South was $156,300, down 3.3 percent from July 2009.

Existing-home sales in the West fell 25.0 percent to an annual level of 870,000 in July and are 23.0 percent below a year ago. The median price in the West was $224,800, up 3.3 percent from July 2009.

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