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2007-08-29 08:01:00

Existing-Homes Sales Stable In July

Washington, DC --  Existing-home sales were essentially unchanged in July, with increases in the West and Northeast offset by a decline in the Midwest, according to the National Association of REALTORS®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – slipped 0.2%  to a seasonally adjusted annual rate (1) of 5.75 million units in July from an upwardly revised pace of 5.76 million in June, and are 9.0% below the 6.32 million-unit level in July 2006. 

Lawrence Yun, NAR senior economist, said the market is holding on despite temporary mortgage disruptions. “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months,” he said. “Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize. 

“The rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is promising because this was the first region that underwent sales and price weakness after the boom. Now, it appears that it will be the first region to climb back, indicating that other regions could follow a similar path.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.70% in July, up from 6.66% in June; the rate was 6.76% in July 2006. Last week, Freddie Mac reported the 30-year fixed rate dropped to 6.52%.

The national median existing-home price (2) for all housing types was $228,900 in July, down 0.6%  from July 2006 when the median was $230,200, the highest monthly price on record. The median is a typical market price where half of the homes sold for more and half sold for less.

Total housing inventory rose 5.1% at the end of July to 4.59 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace, up from an upwardly revised 9.1-month supply in June.

NAR President Pat V. Combs, from Grand Rapids, MI, and vice president of Coldwell Banker-AJS-Schmidt, said that mortgages are available for the majority of potential buyers. “For buyers able to qualify for conventional financing, there are ample opportunities in the current market,” she said.  “Availability and pricing of conventional loans are reasonable, and FHA-insured mortgage applications have been rising as low- and moderate-income buyers seek alternatives to subprime loans. If buyers are in it for the long haul, now can be a good time to get into your home.”

Combs added it’s important to boost FHA’s viability. “NAR is advocating for a stronger FHA to help creditworthy borrowers who may be trapped in subprime loans with unfavorable terms,” she said.  “We’d also like to see the elimination of prepayment penalties, which can trap borrowers in mortgages they can no longer afford.”

Single-family home sales slipped 0.4% to a seasonally adjusted annual rate of 5.00 million in July from an upwardly revised level of 5.02 million in June, and are 9.3% below the year-ago pace of 5.51 million units. The median existing single-family home price was $228,600 in July, down 1.0%  from July 2006.

Existing condominium and co-op sales rose 1.4% to a seasonally adjusted annual rate of 750,000 units in July from 740,000 in June, but are 7.5% below the 811,000-unit level in July 2006. The median existing condo price (3) was $230,600 in July, up 2.4%  from a year ago.

Regionally, existing-home sales in the West rose 1.8 percent in July to an annual pace of 1.12 million, but are 15.2% below a year ago.  The median price in the West was $349,400, up 0.9 percent from July 2006.

Existing-home sales in the Northeast increased 1.0% to a level of 1.02 million in July, but are 2.9% lower than July 2006.  The median existing-home price in the Northeast was $290,900, up 5.9%  from a year ago.

Existing-home sales in the South were unchanged at an annual rate of 2.26 million in July, but are 10.7% below a year ago. The median price in the South was $186,300, down 3.2%  from July 2006.

Existing-home sales in the Midwest fell 2.2% in July to a level of 1.35 million, and are 5.6% below July 2006.  The median price in the Midwest was $173,800, which is 1.8% below a year ago.

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(1) The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months.  Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity.  For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.  However, seasonal factors cannot compensate for abnormal weather patterns.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings.  This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. 

Because of these differences, it is not uncommon for each series to move in different directions in the same month.  In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

(2) The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns.  Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.  Changes in the geographic composition of sales can distort median price data.

Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.

(3) Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price.  In a given market area, condos typically cost less than single-family homes.

Existing-home sales for August will be released September 25.  The next Pending Home Sales Index will be on September 5 and the forecast will be revised September 11.

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