Existing Home Sales Drop

MBA (7/25/2008 ) Velz, Orawin
Total existing home sales fell 2.6 percent in June to a seasonally-adjusted annualized rate of 4.86 million, as the 3.2 percent drop in single-family home sales outweighed the 1.7 percent increase in condo sales.
This marked the slowest pace of total existing home sales since the inception of the series in January 1999. Single-family existing home sales posted the lowest level since January 1998.

Sales of single-family homes during the first half of this year were down 17.6 percent from those during the same period last year. The decline in condo sales have been more pronounced, with year-to-date condo sales 25.5 percent lower than those last year.

Existing home sales decreased in three regions: 6.6 percent in the Northeast; 3.5 percent in the Midwest; and 3.1 percent in the Northeast. The West posted an increase of 1.0 percent, the fourth consecutive monthly increase. Foreclosure or distressed sales, which accounted for nearly a third of the national market, according to the National Association of Realtors, helped support sales in the West over the past several months.

The share varied significantly by state. For example, according to a report by DataQuick released on July 16, foreclosure sales accounted for 41.1 percent of Southern California existing home sales in June. The share was only 7.3 percent in June 2007.

The West has experienced the highest foreclosure rate and suffered the largest price decline in the nation, as foreclosed homes are usually sold at a deep discount. While the median price for total existing homes for the nation fell 6.1 percent in June from a year ago, the decline was 17.2 percent in the West. Since February, the region has posted double-digit year-over-year home price declines, which helped lure buyers back into the market.

The number of total homes available for sale was little changed in June from May and was up 2.8 percent from June 2007. (The data are not seasonally adjusted.) A slower sales pace and a flat inventory pushed up the months’ supply of total existing homes to 11.1 months in June from 10.8 months in May and from 9.1 months a year ago.

A separate report showed that housing inventory remained a big problem. In the second quarter, the homeowner vacancy rate—the share of units typically occupied by owners that are for sale and vacant—edged down to 2.8 percent from a record 2.9 percent in the first quarter. High homeowner vacancy rates put downward pressure on home prices because sellers of vacant homes (who may be paying another mortgage elsewhere or who may be trying to sell foreclosed homes) are more likely to slash price to make a sale than sellers who still live in their homes.

The Treasury markets rallied and yields moved lower as investors sought safe havens from stock markets. Stocks tumbled in response to downbeat earnings and home sales data. The yield on the 10-year Treasury note stayed around 4.04 percent by mid-Thursday afternoon, 13 basis points lower than the rate on Wednesday.