Existing-home sales dropped sharply in July to historic lows after the home buyer tax credit expired, but home prices continued to gain, the National Association of Realtors (NAR) reported Tuesday, August 24.
Sales of existing single-family houses, townhomes, condominiums, and co-ops dropped 27.2% to a seasonally adjusted annual rate of 3.83 million units from a downwardly revised 5.26 million in June, the NAR said in its July report. Compared to a year ago, sales were 25.5% below the 5.14 million-unit level of July 2009.
Sales are at the lowest level since the NAR's existing-home sales series launched in 1999. Single-family sales, which account for the bulk of transactions, are at their lowest level since May 1995.
In other unpleasant economic news on Tuesday, the International Council of Shopping Centers (ICSC) and Goldman Sachs released their weekly U.S. chain store sales index, which has shown retail sales steadily declining over the last month. For the week ending August 21, sales were down 0.4% compared to the previous week, which showed a 1.3% drop as of August 14.
The soft home sales pace likely will continue for a few additional months, according to Lawrence Yun, NAR chief economist.
"Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired," Yun said in a statement. "Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September."
Given current "rock bottom" mortgage interest rates and historically high housing affordability, the pace of a sales recovery could pick up quickly if the economy consistently adds jobs, Yun added.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.56% in July from 4.74% in June. The rate was 5.22% in July 2009. Last week, Freddie Mac reported the 30-year fixed was down to 4.42%.
The national median existing-home price for all housing types was $182,600 in July, up 0.7% from a year ago, according to the NAR. Distressed home sales are unchanged from June, accounting for 32% of transactions in July; they were 31% in July 2009.3
Single-family median existing-home prices were higher in 11 out of 19 metropolitan statistical areas reported in July in comparison with July 2009. However, existing single-family home sales fell in all 20 areas from a year ago.
Northeast existing-home sales dropped 29.5% month to month, to an annual pace of 620,000 in July, 30.3% lower than a year ago. The median price in the Northeast was $263,800, up 4.8% from July 2009. Existing-home sales in the Midwest fell 35.0% in July to a level of 800,000, 33.3% below July 2009. The median price in the Midwest was $151,600, down 2.8% from a year ago.
In the South, existing-home sales dropped 22.6% to an annual pace of 1.54 million in July, 19.8% below a year ago. The median price in the South was $156,300, down 3.3% from July 2009. Existing-home sales in the West fell 25.0% to an annual level of 870,000 in July, 23.0% below a year ago. The median price in the West was $224,800, up 3.3% from July 2009.
Read about the NAR index of existing home sales in June from the archives of InvestmentAdvisor.com.