By Mike Colpitts
Home sales saw a dip as weary buyers cancelled more purchase transactions in June, according to the National Association of Realtors. Existing sales declined in the West and Northeast to out pace an increase in real estate sales in the Southern and Mid-Western sections of the U.S.
Sales of single family homes, condominiums, townhouses and co-ops dipped a slim 0.8% for the month to a seasonally adjusted volume of 4.77 million units, and still remain below last year’s pace when the home buyer tax credit was winding up offered by the federal government. The reasons behind the real estate market slowdown in sales aren’t clear, but weak consumer confidence and nervousness over the troubled U.S. economy are believed to contribute to the slowdown.
“Home sales had been trending up without a tax stimulus,” said NAR chief economist Lawrence Yun. “But a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month. The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16% of NAR members report a sales contract was cancelled in June, up from 4% in May, which stands out in contrast with the pattern over the past year.”
Transactions are typically cancelled when purchasers don’t qualify for a mortgage, the property doesn’t appraise for an agreed upon value and the parties are unable to negotiate a price that is acceptable or there are other problems with the property such as excess termite damage or other issues. Declining home values in a large percentage of transactions have killed many deals this year as a result of unacceptable appraisals.
Homeowners are having difficulty selling their homes in many circumstances as a result. Foreclosures and short sales composed 30% of real estate market sales nationally during the month, a slight 1% decline from the previous month. The median price, which represents the halfway point for all sales was $184,300 in June, a slight 0.8% uptick.
“With record high housing affordability conditions thus far in 2011, we’d normally expect to see stronger home sales,” said NAR President Ron Phipps. “Even with job creation below expectations, excessively tight loan standards are keeping many buyers from completing deals. Although proposals being considered in Washington could effectively put more restrictions on lending, some banking executives have hinted that credit may return to more normal safe standards in the not too distant future, but the tardiness of this process is holding back the recovery.”
Another sign the market may be in for an extended slow down in sales is an increase in housing inventory. The number of homes listed at the end of June rose 3.3% to 3.77 million existing homes available for sale, which represents a 9.5 month supply at the current sales pace. A six month supply of homes on the market would indicate a healthy balance.
Cash transactions driven by investors for the most part accounted for 29% of sales, while first time buyers purchased 31% of homes during the month, down from 36% in May.