July Sales Fell Less than Last Year

Existing-home sales declined in July from an upwardly revised June pace but are notably higher than a year ago, when sales suffered a double whammy from seasonal decline at the end of the spring buyer season and the expiration of the home buyer tax credit.

July sales fell 3.5 percent but they 21 percent ahead of sales at this time last year, according to the National Association of Realtors. Total existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell to a seasonally adjusted annual rate of 4.67 million in July from 4.84 million in June, but are 21.0 percent above the 3.86 million unit pace in July 2010,

Lawrence Yun, NAR’s chief economist, blamed the sales decline on the lack of financing for all but the most highly qualified borrowers. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs,” he said.

Low appraisals continue to plague buyers and sellers. Contract failures - cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price - were reported by 16 percent of Realtors. In addition, 9 percent of Realtors report a contract was delayed in the past three months due to low appraisals, and another 13 percent said a contract was renegotiated to a lower sales price because an appraisal was below the initially agreed price.

“Beyond the tight credit problems, all appraisals must be done by valuators with local expertise and using reasonable comparisons - it doesn’t make sense to consistently see so many valuations coming in below negotiated prices, often below replacement construction costs,” said NAR President Ron Phipps.

In an environment following a large price correction, Phipps said a price negotiated between a buyer and seller would appear to be a fair market price. “Banks frequently request numerous sales comparisons, well beyond the customary three comps used in the past, with little consideration that some of those properties may be discounted foreclosures used to valuate a traditional home in good condition,” he said. “To a great extent, banks are exerting influence on appraised valuations with negative impacts for both home sales and prices.”

Distressed homes - foreclosures and short sales typically sold at deep discounts - accounted for 29 percent of sales in July, compared with 30 percent in June and 32 percent in July 2010.

Total housing inventory at the end of July fell 1.7 percent to 3.65 million existing homes available for sale, which represents a 9.4-month supply4 at the current sales pace, up from a 9.2-month supply in June.

All-cash sales accounted for 29 percent of transactions in July, unchanged from June; they were 30 percent in June 2010; investors account for the bulk of cash purchases.

First-time buyers purchased 32 percent of homes in July, up from 31 percent in June; they were 38 percent in July 2010. Investors accounted for 18 percent of purchase activity in July compared with 19 percent in June and 19 percent in July 2010. The balance of sales was to repeat buyers, which were a 50 percent market share in July, unchanged from June.

Single-family home sales declined 4.0 percent to a seasonally adjusted annual rate of 4.12 million in July from 4.29 million in June, but are 21.5 percent above the 3.39 million level in July 2010. The median existing single-family home price was $174,800 in July, down 4.5 percent from a year ago.

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 550,000 in July, and are 17.3 percent above the 469,000-unit pace one year ago. The median existing condo price5 was $168,400 in July, down 4.0 percent from July 2010.

Regionally, existing-home sales in the Northeast rose 2.7 percent to an annual level of 750,000 in July and are 19.0 percent above July 2010. The median price in the Northeast was $245,600, down 6.8 percent from a year ago.

Existing-home sales in the Midwest increased 1.0 percent in July to a pace of 1.05 million and are 31.3 percent above a year ago. The median price in the Midwest was $146,300, down 2.9 percent from July 2010.

In the South, existing-home sales declined 1.6 percent to an annual level of 1.84 million in July but are 19.5 percent above July 2010. The median price in the South was $152,600, which is 2.2 percent below a year ago.

Existing-home sales in the West fell 12.6 percent to an annual pace of 1.04 million in July but are 16.9 percent above a year ago. The median price in the West was $208,300 down 7.1 percent from July 2010.