Existing-Home Sales Improve in July, Prices Continue to Rise

Existing-Home Sales Improve in July, Prices Continue to Rise

The National Association of Realtors® reports that sales of existing homes rose in July even with constraints of affordable inventory, and the national median price is showing five consecutive months of year-over-year increases. Where everywhere else is tight, monthly sales rose in every region but the West.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 2.3% to a seasonally adjusted annual rate of 4.47 million in July from 4.37 million in June, and are 10.4% above the 4.05 million-unit pace in July 2011.

Lawrence Yun, NAR chief economist, said housing affordability conditions are very good.  “Mortgage interest rates have been at record lows this year while rents have been rising at faster rates.  Combined, these factors are helping to unleash a pent-up demand,” he said.  “However, the market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions.”


Given population and demographic demand, Yun also said existing-home sales could be in a normal range of 5 to 5.5 million if all conditions were optimal.  “Sales may reach 5 million next year, but it will require more sensible lending standards and stronger job creation to push beyond that,” he said.

The national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.55% in July from 3.68% in June; the rate was 4.55% in July 2011, according to Freddie Mac.

“Fewer sales in the lower price ranges are contributing to stronger increases in the median price, but all of the home price measures now are showing positive movement and that is building confidence in the market,” Yun said.  “Furthermore, the higher median price naturally means more housing contribution to economic growth.”

Up from 9.4% from a year ago, the national median existing-home price for all housing types was $187,300 in July.  January to May of 2006 was the last time there were five back-to-back monthly price increases from a year. The July gain was the strongest since January 2006 when the median price rose 10.2%  from a year earlier.

Distressed homes – foreclosures and short sales sold at deep discounts – were down from 25% in June and 29% in July of 2011, accounted for 24% of July sales (12% were foreclosures and 12% were short sales). Foreclosures sold for an average discount of 17% below market value in July, while short sales were discounted 15 %.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said pricing is the primary factor in determining how long homes stay on the market.  “Correctly priced homes, regardless of price range, are selling quickly these days,” he said.  “Fully one-third of homes purchased in July were on the market for less than a month, and only 21% were on the market for six months or longer.  Sellers should carefully consider a Realtor’s ^® advice about marketing their homes,” Veissi said.

Total housing inventory at the end July increased 1.3% to 2.40 million existing homes available for sale, which represents a 6.4-month supply at the current sales pace, down from a 6.5-month supply in June.  Listed inventory is 23.8% below a year ago when there was a 9.3-month supply.

Yun said there are distortions in housing inventory.  “The total supply of housing inventory appears to be balanced in historic terms, but there are notable shortages in the lower price ranges which are limiting opportunities for first-time buyers,” he said.  “The low price ranges also are popular with investors, so entry-level buyers are at a disadvantage because many investors are making all-cash offers.”

Up from 32% in June, first-time buyers accounted for 34% of purchasers in July. Under normal conditions, entry-level buyers account for four out of 10 purchases.

All-cash sales slipped to 27% of transactions in July from 29% in June; they were 29% in July 2011.  Investors, who account for the bulk of cash sales, purchased 16% of homes in July, down from 19% in June; they were 18% in July 2011.

Single-family home sales increased 2.1% to a seasonally adjusted annual rate of 3.98 million in July from 3.90 million in June, and are 9.9% above the 3.62 million-unit level in July 2011.  The median existing single-family home price was $188,100 in July, up 9.6% from a year ago.

 Source: Realtor.org