July Existing-Home Sales at Highest Level Since 2009

July Existing-Home Sales at Highest Level Since 2009

08/21/2013 BY: MARK LIEBERMAN, FIVE STAR INSTITUTE ECONOMIST

Existing-home sales soared 6.5 percent in July to an annual sales rate of 5.39 million—the highest level since November 2009—as the price of a single-family home slipped 0.2 percent, the National Association of Realtors reported Wednesday.

Economists surveyed by Bloomberg expected existing-home sales to increase more modestly to 5.15 million from June’s originally reported sales pace of 5.08 million. June sales were revised down to 5.06 million.

The boost in sales came two months after a sharp jump in NAR’s Pending Home Sales Index, which was 111.3 in May, up 5.8 percent from April.

Despite the month-over-month decline, the median price of an existing-home was $213,500, 13.7 percent ahead of the price in July 2012. It was the strongest yearly price gain since October 2005.

The inventory of homes for sale rose to 2.28 million from 2.15 million in June, translating to a 5.1 month supply, unchanged from a month ago. June’s inventory was revised down from last month’s report.

The improving sales pace may be even more impressive than the historic comparison suggests, since November 2009 sales were affected by a renewal of the homebuyer tax credit that had expired earlier than year.

The sales data came shortly after a Federal Reserve survey showed an increase in applications from prime and sub-prime borrowers as well as for non-traditional mortgage loans. According to the same survey, lenders have eased lending standards.

With the July report, the sales pace topped 5 million for the third month in a row for the first time since September-November 2007. July sales were 790,000 (17.2 percent) ahead of sales one year ago, the largest year-over-year percentage improvement since May 2010. Sales have improved on a yearly basis for 18 straight months.

Existing-home sales continue to be plagued though by a tight inventory. The number of homes on the market in July was down 120,000 from a year earlier. Though flat in June, months’ supply of homes for sale—computed using the number of homes for sale and the sales pace—was down 1.2 months from a year earlier. The months’ supply has been down year-over-year for 25 straight months.

The median price of an existing single-family home fell for the first time in six months but has been up annually for 17 months in a row. Compared to its July 2006 peak, the median price is down 7.3 percent.

According to NAR, “the only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data.”

According to NAR, distressed homes—foreclosures and short sales—accounted for 15 percent of July sales, matching June as the lowest share since monthly tracking began in October 2008; they were 24 percent in July 2012. Nine percent of July sales were foreclosures, and 6 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in July, while short sales were discounted 12 percent. The continuing declines in the share of distressed sales accounted for some of the year-over-year price gain, NAR said.

According to the Realtor group, the median time on market for all homes was 42 days in July, up from 37 days in June but 39 percent faster than the 69 days on market in July 2012. Non-distressed homes were on the market for 40 days, NAR said, while short sales were on the market for a median of 72 days and foreclosures for 50 days. Nearly half—45 percent—of homes sold in July were on the market for less than a month.

All-cash sales made up 31 percent of transactions in July, matching June but down from 33 percent in May, NARreported. All-cash sales were 27 percent in June 2012.

First-time homebuyers accounted for 29 percent of July sales, matching June, but down from 34 percent a year ago.

Regionally, existing-home sales in the Northeast surged 12.7 percent to an annual rate of 710,000 in July and are 20.3 percent above July 2012. The median price in the Northeast was $271,200, up 6.7 percent from a year ago and 0.4 percent from June.

Existing-home sales in the Midwest rose 5.8 percent in July to a pace of 1.28 million and are 20.8 percent higher than a year ago. The median price in the Midwest was $168,300, 9.5 percent above July 2012 but 1.1 percent down from June.

In the South, existing-home sales increased 5.0 percent to an annual level of 2.11 million in July and are 16.6 percent above July 2012. The median price in the South was $183,400, up 13.6 percent from a year ago. The median price in July was down 1.6 percent from June.

Existing-home sales in the West rose 6.6 percent to a pace of 1.29 million in July and are 13.2 percent higher than a year ago. The median price in the West was $287,500, which is 19.2 percent above July 2012 and 2.4 percent above June.

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