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US Residential prices up for fourth month in a row but sales are down

Sean Wang - Tuesday, July 24, 2012

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Existing home prices in the United States increased in June but sales fell with tight supplies of affordable homes limiting first time buyers, according to the latest report from the National Association of Realtors.

Total existing home sales, which are completed transactions that include single family homes, town homes, condominiums and co-ops, declined 5.4% to a seasonally adjusted annual rate of 4.37 million in June from an upwardly revised 4.62 million in May, but are 4.5% higher than the 4.18 million unit level in June 2011.

According to Lawrence Yun, NAR chief economist, the bigger story is lower inventory and the recovery in home prices. ‘Despite the frictions related to obtaining mortgages, buyer interest remains solid. But inventory continues to shrink and that is limiting buying opportunities. This, in turn, is pushing up home prices in many markets. The price improvement also results from fewer distressed homes in the sales mix,’ he explained.

The national median existing home price for all housing types was $189,400 in June, up 7.9% from a year ago. This marks four back to back monthly price increases from a year earlier, which last occurred in February to May of 2006. June's gain was the strongest since February 2006 when the median price rose 8.7% from a year earlier.

Distressed homes, that is foreclosures and short sales sold at deep discounts, accounted for 25 of June sales, unchanged from May but down from 30% in June 2011. Some 13% were foreclosures and 12% were short sales.

Foreclosures sold for an average discount of 18% below market value in June, while short sales were discounted 15%.

‘The distressed portion of the market will further diminish because the number of seriously delinquent mortgages has been falling,’ said Yun.

NAR president Moe Veissi pointed out that there has a steady growth in buyer interest. ‘Buyer traffic has virtually doubled from last fall, while seller traffic has risen only modestly. The very favourable market conditions are helping to unleash a pent up demand, which is why housing supplies have tightened and are supporting growth in home prices. Nonetheless, incorrectly priced homes will not attract buyers,’ he explained.

Total housing inventory at the end June fell another 3.2% to 2.39 million existing homes available for sale, which represents a 6.6 month supply at the current sales pace, up from a 6.4 month supply in May. Listed inventory is 24.4% below a year ago when there was a 9.1 month supply.

First-time buyers accounted for 32% of purchasers in June, compared with 34% in May and 31% in June 2011. ‘A healthy market share of first-time buyers would be about 40%, so these figures show that tight inventory in the lower price ranges, along with unnecessarily tight credit standards, are holding back entry level activity,’ Yun said.

All cash sales edged up to 29% of transactions in June from 28% in May. They were 29% in June 2011. Investors, who account for the bulk of cash sales, purchased 19% of homes in June, up from 17% in May and compared with 19% in June 2011.

Single family home sales declined 5.1% to a seasonally adjusted annual rate of 3.90 million in June from 4.11 million in May, but are 4.8% above the 3.72 million unit pace in June 2011. The median existing single family home price was $190,100 in June, up 8% from a year ago.

Existing condominium and co-op sales fell 7.8% to a seasonally adjusted annual rate of 470,000 in June from 510,000 in May, but are 2.2% higher than the 460,000 unit level a year ago. The median existing condo price was $183,200 in June, which is 6.9% above June 2011.

Regionally, existing home sales in the Northeast dropped 11.5% to an annual pace of 540,000 in June but are 1.9% above June 2011. The median price in the Northeast was $253,700, down 1.8% from a year ago.

Existing home sales in the Midwest slipped 1.9% in June to a level of 1.02 million but are 14.6% higher than a year ago. The median price in the Midwest was $157,600, up 8.4% from June 2011.

In the South, existing home sales declined 4.4% to an annual pace of 1.73 million in June but are 5.5% above June 2011. The median price in the South was $165,000, up 6.6% from a year ago.

Existing home sales in the West fell 6.9% to an annual level of 1.08 million in June and are 3.6% below a year ago. The median price in the West was $233,300, up 13.3% from May 2011. Given tight supply in both the low and middle price ranges in this region, sales in the West are stronger in the higher price ranges.