Existing-home sales were sharply lower in July following expiration of the home buyer tax credit but home prices continued to gain, according to the National Association of Realtors.
Existing-home sales, which are completed transactions that include single-family, town homes, condominiums and co-ops, dropped 27.2% to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5% below the 5.14 million-unit level in July 2009.
Sales are at the lowest level since the total existing-home sales series launched in 1999, and single family sales, accounting for the bulk of transactions, are at the lowest level since May 1995.
Lawrence Yun, NAR chief economist, said a soft sales pace likely will continue for a few additional months.
"Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired," Yun said. "Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September. However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs."
"Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year," Yun added. "To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years."
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.56% in July from 4.74% in June. The rate was 5.22% in July 2009. Last week, Freddie Mac reported the 30-year fixed was down to 4.42%.
The national median existing-home price for all housing types was $182,600 in July, up 0.7% from a year ago. Distressed home sales are unchanged from June, accounting for 32% of transactions in July; they were 31% in July 2009.
"Thanks to the home buyer tax credit, home values have been stable for the past 18 months despite heavy job losses," Yun said. "Over the short term, high supply in relation to demand clearly favors buyers. However, given that home values are back in line relative to income, and from very low new-home construction, there is not likely to be any measurable change in home prices going forward."
Total housing inventory at the end of July increased 2.5% to 3.98 million existing homes available for sale, which represents a 12.5-month supply at the current sales pace, up from an 8.9-month supply in June. Raw unsold inventory is still 12.9% below the record of 4.58 million in July 2008.
NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, said there are great opportunities now for buyers who weren't able to take advantage of the tax credit.
"Mortgage interest rates are at record lows, home prices have firmed and there is a good selection of property in most areas, so buyers with good jobs and favorable credit ratings find themselves in a fortunate position," she said.
A parallel NAR practitioner survey shows first-time buyers purchased 38 percent of homes in July, down from 43 percent in June. Investors accounted for 19 percent of sales in July, up from 13 percent in June; the balance went to repeat buyers. All-cash sales rose to 30 percent in July from 24 percent in June.
Single-family home sales dropped 27.1 percent to a seasonally adjusted annual rate of 3.37 million in July from a pace of 4.62 million in June, and are 25.6% below the 4.53 million level in July 2009; they were the lowest since May 1995 when the sales rate was 3.34 million. The median existing single-family home price was $183,400 in July, which is 0.9% above a year ago.
Single-family median existing-home prices were higher in 11 out of 19 metropolitan statistical areas reported in July in comparison with July 2009. However, existing single-family home sales fell in all 20 areas from a year ago.
Existing condominium and co-op sales fell 28.1% to a seasonally adjusted annual rate of 460,000 in July from 640,000 in June, and are 24.0% below the 605,000-unit level in July 2009. The median existing condo price was $176,800 in July, down 1.7% from a year ago.
Regionally, existing-home sales in the Northeast dropped 29.5% to an annual pace of 620,000 in July and are 30.3% lower than a year ago. The median price in the Northeast was $263,800, up 4.8% from July 2009.
Existing-home sales in the Midwest fell 35.0% in July to a level of 800,000 and are 33.3% below July 2009. The median price in the Midwest was $151,600, down 2.8% from a year ago.
In the South, existing-home sales dropped 22.6% to an annual pace of 1.54 million in July and are 19.8% below a year ago. The median price in the South was $156,300, down 3.3% from July 2009.
Existing-home sales in the West fell 25.0% to an annual level of 870,000 in July and are 23.0% below a year ago. The median price in the West was $224,800, up 3.3% from July 2009.