WASHINGTON – 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, according to the National Association of Realtors. Monthly sales rose in every region but the West, where inventory is very tight.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 2.3 percent to a seasonally adjusted annual rate of 4.47 million in July from 4.37 million in June, and are 10.4 percent 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.”
NAR is asking the government to expeditiously release the foreclosed properties it owns in inventory-constrained markets.
Given population and demographic demand, Yun 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.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.55 percent in July from 3.68 percent in June; the rate was 4.55 percent in July 2011; recordkeeping began in 1971.
“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.”
The national median existing-home price for all housing types was $187,300 in July, up 9.4 percent from a year ago. The last time there were five back-to-back monthly price increases from a year earlier was in January to May of 2006. The July gain was the strongest since January 2006 when the median price rose 10.2 percent from a year earlier.
Distressed homes – foreclosures and short sales sold at deep discounts – accounted for 24 percent of July sales (12 percent were foreclosures and 12 percent were short sales), down from 25 percent in June and 29 percent in July 2011.
Foreclosures sold for an average discount of 17 percent below market value in July, while short sales were discounted 15 percent.
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 percent 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 percent to 2.40 million existing homes available for sale, which represents a 6.4-month supply4 at the current sales pace, down from a 6.5-month supply in June. Listed inventory is 23.8 percent 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.”