Existing-home sales tumbled 27.2% in July, the National Association of Realtors (NAR) reports, fueling fears that the housing market is entering a double-dip recession. The silver lining, according to NAR, is that home prices continue a modest incline.
Existing-home sales fell to seasonally adjusted annual rate of 3.83 million units last month – down from a downwardly revised 5.26 million in June. Last month's level of sales is 25.5% below the 5.14 million-unit level in July 2009.
Sales are at the lowest level since NAR launched its total existing-home sales series in 1999, and single-family sales – accounting for the bulk of transactions – are at the lowest level since May 1995.
‘Since May, after the [federal tax credit] deadline, contract signings have been notably lower, and a pause period for home sales is likely to last through September," says NAR's chief economist, Lawrence Yun. "However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low of 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 rate was down to 4.42%.
The national median existing-home price for all housing types was $182,600 in July, which was up 0.7% from a year ago. Distressed home sales are unchanged from June, accounting for 32% of transactions in July.
"Thanks to the home-buyer tax credit, home values have been stable for the past 18 months, despite heavy job losses," Yun explains. "Over the short term, high supply in relation to demand clearly favors buyers. However, given that home values are back in line relative to income, and from very low new-home construction, there is not likely to be any measurable change in home prices going forward."
Total housing inventory at the end of July increased 2.5% to 3.98 million existing homes available for sale, which represents a 12.5-month supply at the current sales pace, NAR says. That is up from an 8.9-month supply in June.
A parallel NAR practitioner survey shows that first-time buyers accounted for fewer sales in July than in June (38% versus 43%), and that the percentage of sales made to investor buyers rose from 13% in June to 19% last month.