Realty Times - Real Estate Outlook: Home Sales Decline in June

Existing home sales fell in June according to the National Association of Realtors (NAR). Already tough conditions were tightened further by a tight supply of affordable homes for first-time buyers.

Lawrence Yun, NAR chief economist, said the bigger story, however, 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," he said. "The price improvement also results from fewer distressed homes in the sales mix."

Total existing prices may have risen in June, but sales were down 5.4 percent for the month. This is still 4.5 percent above June 2011 levels.

A gain in price is good news as distressed properties still account for a large portion of the market. According to the NAR, "Distressed homes - foreclosures and short sales sold at deep discounts - accounted for 25 percent of June sales (13 percent were foreclosures and 12 percent were short sales), unchanged from May but down from 30 percent in June 2011. Foreclosures sold for an average discount of 18 percent below market value in June, while short sales were discounted 15 percent. "The distressed portion of the market will further diminish because the number of seriously delinquent mortgages has been falling," said Yun.

Existing home sales were down in all regions. The Northeast experienced the largest decline, falling 11.5 percent to an annual pace of 540,000 in June. Median price for the region was down as well. It fell 1.8 percent from year ago levels. All other regions are seeing gains in median price from a year ago.

The West had the second largest decline in home sales, falling 6.9 percent. The South followed with a 4.4 percent drop. The Midwest held the most steady, falling just 1.9 percent and coming in with the lowest median prices of all regions at $157,600.

Meager sales are only part of the problem for troubled builders. In a recent plea to Congress, the National Association of Home Builders (NAHB) said that an unwieldy federal regulatory process is hampering the housing and economic recovery.

"Housing serves as a great example of an industry that would benefit from smarter and more sensible regulation," NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla., told the House Committee on Oversight and Government Reform.

However, it is critical that such reforms are implemented in a manner that causes minimum disruption to the mortgage lending process," he cautioned. "New reforms should not limit consumer financing option."

Construction lending also weighs heavily on the minds of builders across then nation. "Restoring the flow of credit to home builders will not only help to put America back to work, it will help provide badly needed tax revenues that local governments need to fund schools, police, firefighters and other public services," said Rutenberg.

Published: July 30, 2012

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Source: http://realtytimes.com/rtpages/20120730_realestateoutlook.htm

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