Existing home sales continued their recent downward trend in July. The National Association of Realtors (NAR) reported sales of existing homes fell to 4.67 million in July from an upwardly revised 4.84 million in June—a decline of 3.5%. Since January, existing home sales have fallen 13.5%.
Single-family home sales were down 4.0% in July to 4.12 million units, but condominium and co-op sales remained unchanged at 550,000 units. Across the regions, sales gains in the Northeast (up 2.7% to an annual pace 750,000 units) and Midwest (rising 1.0% to 1.05 million units), were offset by declines in the South (down 1.6% to 1.84 million) and the West (falling 12.6% to 1.04 million units).
The housing inventory at the end of July was 3.65 million, down 1.7%. This represents a 9.4-month supply at the current sales rate.
The parallel NAR practitioner survey indicates that the share of distressed sales – foreclosures and short sales typically sold at deep discounts –trended lower, accounting for 29% of sales in July, compared with 30% in June and 39% in March.
Investors’ share of home sales continued to slide, dropping back to 18% in July from 19% in June and 23% in January 2011. Investors’ share had been rising steadily and supporting home sales earlier in the year, but it appears that investors are becoming increasing cautious in the weakening economic climate.
The decline in existing homes sales in July was not unexpected; however, it was a departure from the pending homes sales index (PHSI), which tracks contracts signed and typically leads existing home sales (closed sales) by one or two months. The PHSI has risen over the past two months, thus an increase in existing home sales would typically be expected. The NAR suggest that contract failures, caused by declined mortgage applications or failures in loan underwriting, are a major factor in this divergence and indicate that 16% of NAR members reported contract cancellations in the past month.