U.S. sales of existing homes declined 0.8% in June to a seasonally adjusted annual rate (SAAR) of 4.77 million units, the National Association of Realtors reported on July 20. This is the third straight monthly decline, following a 3.8% decline in May and another 1.8% in April. Existing home sales are currently 8.8% below their level a year ago, and 34.2% below their September 2005 peak. May 2011 sales were hurt by weather to an extent, and June sales were affected by an unusual 16% spike in contract cancellations for the month. This may suggest that economic uncertainty and a weak jobs market have increased hesitation among both buyers and lenders. Overall, existing home sales have declined in four of the past five months, which highlights the slow recovery in sales and home prices. Meanwhile, despite average 30-year fixed mortgage rates of 4.46% at the end of June and currently near a year-to-date low of 4.54%, the weak demand continues to pressure home sales and prices. Although seasonally adjusted data tends to be a better indicator, the only good news in the latest data was that seasonally unadjusted sales increased a significant 11.2% and across all four regions in June.
Highlights of June’s Existing Home Sales
- Existing home sales were down 0.8% based on the completed transactions in June. This decline in sales comes after a 1.8% decline in April and a 3.8% decline in May. Existing sales were down 8.8% year over year, and the 12-month change has been mostly negative since June 2010.
- Existing home sales peaked in September 2005 and declined about 34.2% through June 2011. However, existing sales improved significantly during late 2009 through early 2010, primarily as a result of the U.S. government’s now-expired tax incentives.
- Existing sales declined in the Northeast and West in June. Existing sales in the South increased 0.5% in June and are 5.6% below their June 2010 level. Existing sales in the Midwest increased 1% in June, but declined 14% from a year ago. Existing sales in the Northeast declined 5.2% and 17% year over year. Finally, existing sales in the West declined 1.7% in June and 2.6% year over year.
- Existing condominium and co-op sales dropped 7% in June, and single-family home sales were unchanged.
- First-time home buyers accounted for 31% of sales in June, down from 36% a month ago. Also, cash transactions were 29% of June sales.
- The national median home sale price was $184,300 last month, up 8.9% from May and 0.8% from a year ago. Median home sale prices were down in the Midwest and South on a year-over-year basis.
- June’s official inventory was 3.77 million homes, up 3.3% from a month earlier. The months’ supply increased to 9.5 months in June from 9.1 months in May at the current sale pace. This does not include the unofficial shadow inventory, which remains the key concern for the housing market recovery in addition to high unemployment rates.
- High levels of distressed sales are likely to push home prices lower because distressed homes are usually sold at a discount. Distressed sales were about 30% of total sales in June, down from 31% in May. Distressed sales were 32% of June 2010’s total.
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