By Mike Colpitts
Home sales declined sharply in July after the expiration of the home buyer tax credit, falling 27.2% to the lowest level in 15 years, according to the National Association of Realtors.
The fall in existing sales was widely anticipated among real estate analysts, who expect deeper economic worries as a result of the declining home market. The sale of single family homes, townhouses and condominiums dropped to a seasonally adjusted rate of just 3.83 million units during the month down from a revised 5.26 million in June. The drop in transactions is well below seasonal averages, attributed to high unemployment and a tight mortgage lending market.
Record low mortgage rates haven’t done much to spur the ailing market in most areas of the country, especially markets that have been devastated by the foreclosure crisis. Slightly more than a handful of states are showing signs of stabilizing, including places like Nebraska, North Dakota and South Dakota, which sustained only minor fallout from the housing downturn. The rate of a fixed rate conventional 30-year mortgage fell to an average of 4.42% last week, according to Freddie Mac.
However, there are also exceptions with markets in Colorado and California demonstrating strong signs of recovery, despite outside economic stresses. Prices on homes in much of California are still selling at half of what they sold for during the peak of the market.
A full recovery in the housing market nationally is expected to take a number of years, according to Housing Predictor analysts who were the first to forecast the foreclosure crisis. Distressed home sales, including foreclosures and short sales accounted for 32% of all transactions counted by NAR, which does not include private sales, many banks and lending institutions and properties sold at auction.
The median price of all housing types was up 0.7% from a year ago, according to NAR figures. The median price is the statistical point at which half of homes sell for more and half for less, and is not representative of average home prices. Home prices in the majority of markets tracked by Housing Predictor show deflation is continuing to pull down home values.
“Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired,” said NAR chief economist Lawrence Yun. “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.
The fall off in home sales are showing wider economic worries prevail. Nearly four hours after opening, the New York Stock Exchange Dow Jones Industrial average was down more than 100 points in active trading. Financials were leading the market lower.
The inventory of homes listed by Realtors also showed an increase during July up 2.5% to 3.98 million homes. The figure represents a 12.5-month supply of property at the markets current pace. Housing markets are usually considered in balance when about a six month supply is available.