WASHINGTON: US sales of existing homes rose in July to a five-month high but the glut of unsold homes hit a record high, according to industry data yesterday that suggests the housing market remains in crisis.
The National Association of Realtors (NAR) reported sales of existing homes and apartments increased 3.1 percent to a seasonally adjusted annual rate of 5.00 million units in July from a downwardly revised level of 4.85 million in June.
The report was better than analysts’ forecast of a sales pace of 4.90 million units. On a 12-month basis, July sales of homes and apartments fell 13.2 percent, underscoring the deep woes of the real estate market. The median existing-home price for all housing types was $212,400 in July, down 7.1 percent from a year ago.
However, analysts pointed out that the modest monthly gain in sales benefited from fire-sale prices from foreclosures and the glut of unsold homes means that recovery in the housing market, at the epicenter of US economic woes, remains out of sight.
The small rise in monthly sales “is a reflection of increased sales of foreclosed homes at very low prices, rather than a pick-up in the regular private sales market, but they all count,” said economist Ian Shepherdson at High Frequency Economics. “Any real improvement is still a long way off,” he said, adding he expects home prices “to keep falling.” Elsa Dargent, an analyst at Natixis, agreed.
“The rebound in existing home sales does not indicate the beginning of a recovery in the housing market as the level of excess supply continues to rise and sales’ prices keep falling, suggesting that the downward adjustment in prices is not over,” she said.
Lawrence Yun, NAR’s chief economist, said that home prices in some regions could soon increase, citing a strong jump in sales in Florida and California, two of the hardest-hit states in the worst housing slump in decades. “Sales have picked up significantly in several Florida and California markets. Home prices generally follow sales trends after a few months of lag time,” Yun said.
NAR said the inventory of unsold homes at the end of July rose 3.9 percent to 4.67 million units, an 11.2-month supply at the current sales pace, up from a 11.1-month supply in June.
The rise in supply was mainly from a spike in condominiums on the market that offset a decline in the inventory of single-family homes. “Inventory remains high in many parts of the country and will require time to fully absorb. We expect more balanced conditions in 2009 and will eventually return to normal long-term appreciation patterns,” Yun said. According to NAR, its price data since 1968 shows home prices normally rise 1.0 to 2.0 percentage points above the overall rate of inflation, building wealth for the homeowner.
Prospective buyers faced tighter credit conditions in July amid continuing stresses in the financial sector from a housing-related meltdown that began a year ago.
President George W. Bush signed a massive housing rescue package in late July to help home buyers avert foreclosures and shore up ailing mortgage finance giants Fannie Mae and Freddie Mac, government-sponsored and shareholder-owned firms that underpin about 40 percent of the US housing market.
The average rate for a 30-year, conventional, fixed-rate mortgage rose to 6.43 percent in July from 6.32 percent in June, according to Freddie Mac.
NAR President Richard Gaylord said the industry hopes to see sales lifted by the government housing stimulus package.
“We hope the new tools in the hands of home buyers from the recently enacted housing stimulus package will spark a sustained sales uptrend in the months ahead,” Gaylord said.
