Existing Home Sales Improved in August while Prices Trended Down

by devteam September 23rd, 2011 | Share

Despite what they referred to as “headwinds,”rnthe National Association of Realtors (NAR)® reported on Wednesday that sales ofrnexisting homes were up in August compared to July and were significantly higherrnthan one year ago, although prices continue to fall.  Total existing home sales rose 7.7 percent torna seasonally adjusted annual rate of 5.03 million from July’s upwardly revisedrnfigure of 4.67 million and are 18.6 percent higher than the 4.24 million pace inrnAugust 2010.  Total existing-home salesrnare completed transactions that include single-family, townhomes, condominiumsrnand coops.</p

NAR noted that the gains came in spiternof continued tight credit and appraisal problems and the disruptions up andrndown the East Coast caused by Hurricane Irene. rnThe gains were seen in all regions although, according to NAR ChiefrnEconomist Lawrence Yun, the hurricane might be responsible for the smallestrnAugust gains occurring in the Northeast which received the brunt of the flooding,rnand power outages.  The hurricane hitrnduring the last week of August, the period when most real estate closings arernscheduled.</p

Singlernfamily home sales increased 8.5 percent month-to-month and 20.2 percent sincernAugust 2010.  SFR sold at an annual raternof 447 million homes compared to July when sales were at the rate of 4.12rnmillion.  Sales of condos andrncooperatives also rose to an annual rate of 560,000 from the pace of 550,000 inrnboth July and June.  This was a monthlyrnincrease of 1.8 percent and was 8.3 percent above the 517,000 sales pace onernyear earlier.  </p

Both median and average sales prices declined for the second straightrnmonth.  Nationally the median price wasrn$168,300 compared to $171,200 in July and $177,300 during the same period inrn2010.  The average price was $216,800rncompared to 220,400 in July and $225,800 one year ago.  The median existing single-family home pricernwas $168,400 in August, which is 5.4 percent below a year ago. The medianrnexisting condo price5 was $167,500 in August, down 3.3 percent from Augustrn2010.</p

Thernprice declines are at least partially fed by the sale of distressed homes, foreclosuresrnand short sales which are typically sold at deep discounts.  These which accounted for 31 percent of salesrnin August, compared with 29 percent in July and 34 percent in August 2010.</p

Investorsrnwere responsible for 22 percent of purchase activity in August, compared to18rnpercent in July and 21 percent in August 2010. rnFirst-time buyers purchased 32 percent of homes in August, unchangedrnfrom July and down one percentage point from August 2010.</p

Twenty-nine percent of August transactions were all-cash,rnunchanged from July and up slightly from 28 percent in August 2010; investorsrnaccount for the bulk of cash purchases.</p

Contractrnfailures continued to be a problem. rnThese cancellations, which are caused primarily by declined mortgagernapplications or because appraisal values come in too low to support thernnegotiated price, were reported by 18 percent of NAR members in August, doublernthe number one year ago and 2 percentage points higher than in July. </p

Yunrnsaid there are some positive market fundamentals.  “Some of the improvement in August may resultrnfrom sales that were delayed in preceding months, but favorable affordabilityrnconditions and rising rents are underlying motivations,” he said.  “Investors were more active in absorbingrnforeclosed properties.  In additional tornbargain hunting, some investors are in the market to hedge against higherrninflation.”</p

Yunrnsaid an extremely important issue currently is the renewal and availability of thernNational Flood Insurance Program, scheduled to expire at the end of this month.  “About one out of 10 homes in this countryrnneed flood insurance to get a mortgage, and we would see significant negativernmarket impacts without it,” he said.</p

Totalrnhousing inventory at the end of August fell 3.0 percent to 3.58 millionrnexisting homes available for sale, which represents an 8.5-month supply at therncurrent sales pace, down from a 9.5-month supply in July.</p

Onrna regional basis sales rose 2.7 percent month over month in the Northeast to anrnannual rate of 770,000 and are 10.0 percent above one year ago.  Sales in the Midwest were up 3.8 percent andrn26.7 percent respectively to a pace of 1.09 million and the South saw a 5.4rnpercent increase to 1.94 million, 16.9 percent higher than in August 2010.  Sales jumped to 1.23 million, in the West, uprn18.3 percent from July and a 20.6 percent increase in a year.</p

Medianrnprices were lower than August 2010 in every region.  In the Northeast the price was $244,100, downrn5.1 percent and in the Midwest $141,700, down 3.5 percent.  The West fell 13 percent to $189,400.  The smallest drop was in the South, down 0.8rnpercent to $151,000.</p

NARrnPresident Ron Phipps said the market is remarkablyrnaffordable for people with secure jobs, good credit and long-term plans.  “The biggest factors keeping home sales fromrna healthy recovery are mortgages being denied to creditworthy buyers, andrnappraised valuations below the negotiated price.  Buyers may be able to find more favorablerncredit terms with community and small regional banks, and Realtors® can often give buyers advice tornhelp them overcome some of the financing obstacles,” Phipps said.</p


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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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