Existing Home Sales Continue to Fall As Prices Gain

The dynamics of the housing market are shifting, hopefully in a direction toward recovery, according to the latest data from the National Association of Realtors.

Sales of existing U.S. homes fell 5.4 percent in June to a seasonally adjusted annual pace of 4.37 million units down from a rate of 4.62 million in May. Compared with the same time last year, however, sales are up 4.5 percent.

Housing inventory is also falling, with the total number of homes for sales dropping to 2.39 million, down 3.2 percent from May. At the current sales rate, it would take 6.6 months to sell the remaining stock of homes. That’s down from a 6.4 month supply the month before. And the current inventory is down 24.4 percent over June 2011.

Yet home prices are on an increasing streak. The national median home price rose to $189,400 in June, up 7.9 percent from the previous year. This marks the fourth consecutive month of year-over-year price increases.

“Despite the frictions related to obtaining mortgages, buyer interest remains solid. But inventory continues to shrink and that is limiting buying opportunities. This, in turn, is pushing up home prices in many markets,” Lawrence Yun, NAR chief economist, said in a press release. “The price improvement also results from fewer distressed homes in the sales mix.”

Distressed properties, including both foreclosures and short sales, made up 25 percent of home sales, compared with 30 percent from a year ago. And there is more good news on that front, says Yun.

“The distressed portion of the market will further diminish because the number of seriously delinquent mortgages has been falling.”

So while home sales have been slipping for a few months now, looking at the yearly figures does bring some hope. Sales and prices are up compared with last year and inventory is down. If this trend continues (and foreclosures do not start pouring into the market as some fear they will), it will help hundreds of thousands of underwater borrowers gain some equity in their homes. That could reduce the likelihood of foreclosure and allow them to jump back into the buying and selling parts of the market.

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