July Existing-Home Sales Fall, But Prices Rise

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, townhomes, condominiums, and co-ops, dropped 27.2 percent 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 percent 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 of 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.  Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” he said.  “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.  To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years,” Yun added.

Mortgage Rates Dip
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.56 percent in July from 4.74 percent in June; the rate was 5.22 percent in July 2009.  Last week, Freddie Mac reported the 30-year fixed was down to 4.42 percent.

The national median existing-home price for all housing types was $182,600 in July, up 0.7 percent from a year ago.  Distressed home sales are unchanged from June, accounting for 32 percent of transactions in July; they were 31 percent 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.”

Inventory Rises
Total housing inventory at the end of July increased 2.5 percent 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 percent below the record of 4.58 million in July 2008.

NAR President Vicki Cox Golder 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 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 were to repeat buyers. All-cash sales rose to 30 percent in July from 24 percent in June.

Breakdown of the Numbers
• 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 percent 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 percent 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 (the price in one of 20 tracked markets was not available).  However, existing single-family home sales fell in all 20 areas from a year ago.
• Existing condominium and co-op sales fell 28.1 percent to a seasonally adjusted annual rate of 460,000 in July from 640,000 in June, and are 24.0 percent below the 605,000-unit level in July 2009. The median existing condo price was $176,800 in July, down 1.7 percent from a year ago.

By Region
• Existing-home sales in the Northeast dropped 29.5 percent to an annual pace of 620,000 in July and are 30.3 percent lower than a year ago. The median price in the Northeast was $263,800, up 4.8 percent from July 2009.
• Existing-home sales in the Midwest fell 35.0 percent in July to a level of 800,000 and are 33.3 percent below July 2009. The median price in the Midwest was $151,600, down 2.8 percent from a year ago.
• In the South, existing-home sales dropped 22.6 percent to an annual pace of 1.54 million in July and are 19.8 percent below a year ago. The median price in the South was $156,300, down 3.3 percent from July 2009.
• Existing-home sales in the West fell 25.0 percent to an annual level of 870,000 in July and are 23.0 percent below a year ago. The median price in the West was $224,800, up 3.3 percent from July 2009.

Source: NAR

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Idaho 1st in Nation for home price decline

Statistics indicate that prices increased nationally for the second month in a row.

Idaho led the nation with a 7.2 percent decrease in the average selling prices of homes between April 2009 and April 2010, a research company said Monday.

National home prices increased an average 2.6 percent, thanks largely to the homebuyer tax credit that expired at the end of April, according to the latest monthly Home Price Index prepared by CoreLogic, of Santa Ana, Calif. That’s almost 10 percent better than Idaho’s average.

Distressed sales like foreclosures and short sales are dragging Idaho’s prices down.

Excluding distressed homes, Idaho’s decrease was just 0.7 percent, CoreLogic said.

“We expect that we will see home prices remain strong through early summer, but in the second half of the year we expect price growth to soften and possibly decline moderately,” said Mark Fleming, chief economist for CoreLogic

Prices in the Boise-Nampa area fell 7.02 percent.

Excluding distressed sales, the Valley’s April home price decrease was 6.03 percent, compared to a drop of 9.28 percent in March.

Source:  Idaho Statesman

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Rental income—a good indicator for real estate stabilization:

Most of my buyers and sellers are concerned about where home prices are headed and want to know whether or not it is a good time to either buy or sell.  I, along with most which have an interest in real estate, wish we had a crystal ball.  If we were so lucky.  Possibly the next best thing is to follow the rental income to establish current market conditions.

“If you look at the trend in rents to see where housing prices are headed, you’re looking at the right measure.” Says Yale economist Robert Shiller who is the co-developer of the S&P Case/Shiller Home Price Indices that monthly track residential real estate values nationally and in 20 metro areas.

In the past, people have been willing to pay a modest premium to own rather than rent a home with recent studies reporting that in 1999 rental income averaged 87% of the after-tax mortgage payment for dwellings of similar size in the same neighborhood.  This percentage changed when home prices skyrocketed.  By mid-2006, rental income had fallen to less than 60% of after-tax mortgage payments with investors banking on appreciation.  In some markets, owners of property were paying twice as much as renters for a similar property in the same neighborhood and in select pockets, owner monthly payments were three times more than the average of rental income.  Wow!

The 87% ratio of rental income to ownership cost for 1999 is a very good benchmark since it stayed around that level throughout the 1990’—prior to the steep rise in home pricing.  With that as our guide, one can conclude that the stabilization of home pricing is on the horizon. By the end of 2009, rental income on average was up to 83% of ownership costs!

Conditions vary from market to market so check with me on current market pricing in our area.  With historically low mortgage rates plus the homebuyer tax credits, this is a great time to be buying.  Call me today for a no-obligation consultation! 

*The idea for this particular post along with some misc statistics were used from an email sent from Guild Mortgage.

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