Real Estate Outlook: Existing-Home Sales
by Carla Hill
Saturday, July 23, 2011
NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said home sales should be higher. "With record high housing affordability conditions thus far in 2011, we'd normally expect to see stronger home sales," he said. "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."
Existing-home sales did rise marginally in the Midwest and South, but all regions are down from the same time last year. The Midwest is now a staggering 14.0 percent below June 2010. The South is down 5.6 percent.
The region that has the most ground the recover is the Northeast, which fell another 5.2 percent in June and is now down 17.0 percent from June 2010.
The West is the closest region to breaking even, down only 2.6 percent from year ago levels.
Lawrence Yun, NAR chief economist, said this is an uneven recovery. "Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month," he said. "The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year."
Yun also noted that the market may be fluctuating in response to economic concern, "Pending home sales were down in April but up in May, so we may be seeing some of that mix in closed sales for June. However, economic uncertainty and the federal budget debacle may be causing hesitation among some consumers or lenders."
Builder confidence is up, however, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
"The improvement in builder confidence in July is a positive sign that the outlook perhaps isn't quite as bleak as was feared in June," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "While builders continue to confront serious challenges with regard to competition from foreclosed properties that are priced below replacement cost, inaccurate appraisals of new homes, and a very restrictive lending environment for new home construction, select markets are showing gradual improvement as consumers begin to take advantage of very favorable buying conditions."
Going hand in hand with builder confidence, nationwide housing starts rose 14.6 percent in June, according to the U.S. Commerce Department.
"Today's numbers are an encouraging sign that builders are responding to improving consumer interest in new homes and apartments by gradually replenishing their extremely thin inventories in places where demand is evident," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "That said, the lack of access to construction credit remains an impediment to starting new projects and getting building crews back to work in markets that are improving."
Regionally, starts activity rose across the board, with double digit gains in 3 of the 4 regions. The Northeast led the way at a 35.1 percent gain. The Midwest had a healthy 25.3 percent gain. The South was up 10.6 percent and the West had a 5.4 percent gain.
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