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Existing-Home Sales fell 0.8% in June
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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.
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. 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.
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.
With record high housing affordability conditions thus far in 2011, we’d normally expect to see stronger home sales. 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.
Lower mortgage loan limits, due to go into effect on October 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.
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.
Posted: July 20, 2011 Wednesday 10:00 AM