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According to a recent report from the National Association of Realtors, existing-home sales fell during July, as declines in the West and South canceled out gains recorded in the Northeast and Midwest.
Overall, the total volume of existing-home sales decreased 3.5 percent during the month, reaching a seasonally adjusted annual rate of 4.67 million units, down from 4.84 million in June. The pace is still 21 percent higher than the rate of 3.86 million set in July 2010, which was the first month following the expiration of the federal homebuyer tax credit.
"Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers," said NAR chief economist Lawrence Yun. "Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs."
Assisting home sales during the month were the affordable interest rates for mortgages nationwide. According to Freddie Mac, the average rate for 30-year fixed loan during July was 4.55 percent, which was up slightly from 4.51 percent in June, but down from 4.56 percent in July 2010. The rate has since fallen to 4.15 percent in August, which is the lowest it has been in nearly 50 years.
The market was frustrated by contract failures, which include declined mortgage applications or failures in loan underwriting. During July, 16 percent of NAR members reported such cases, while 9 percent of Realtors revealed that a contract was delayed during the previous three months because of low appraisals. An additional 13 percent claim a contract was renegotiated for a lower sales price because an appraisal was below the initially agreed price.
NAR president Ron Phipps expressed his frustration with these developments.
"For both mortgage credit and home appraisals, there's been a parallel pendulum swing from very loose standards which led to the housing boom, to unnecessarily restrictive practices as an overreaction to the housing correction," Phipps explained. "Beyond the tight credit problems, all appraisals must be done by valuators with local expertise and using reasonable comparisons – it doesn't make sense to consistently see so many valuations coming in below negotiated prices, often below replacement construction costs."
The median price for an existing homes for sale across all housing types was $174,000 in July, which is down 4.4 percent from the previous year. Distressed homes continued to drag this median value down, as foreclosures and short sales accounted for 29 percent of the month's total volume.
Total housing inventory for the month settled at 3.65 million, which represents a 9.4-month supply. The total inventory is down 1.7 percent.
Regionally, existing-home sales were up 2.7 percent in the Northeast and 1 percent in the Midwest. However, sales were down 1.6 percent in the South and 12.6 percent in West.
First-time homebuyers accounted for 32 percent of July's existing-home sales, which is up slightly from 31 percent in June, but down from 38 percent in July 2010.
Investors continued to represent a significant portion of the market as well, as all-cash sales accounted for 29 percent of the transactions conducted in July, which is the same level recorded in June, but down slightly from 30 percent in June 2010.
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