Distressed Properties Comprise Smaller Share of Declining Home Resales

By: Carrie Bay

Foreclosures and short sales made up 30 percent of all existing-home sales in June, according to data released Wednesday by the National Association of Realtors (NAR).

The market share for distressed properties, as anticipated, has been steadily dwindling with the onset of warmer weather. In May, foreclosures and short sales accounted for 31 percent of home resales. As recently as April their share was 37 percent, and in March it was 40 percent.

Overall sales volume slipped in June along with the share of distressed properties. NAR says total existing-home sales declined 0.8 percent to a seasonally adjusted annual rate of 4.77 million in June, down from 4.81 million in May.

The decline was expected by some analysts after the 11 percent drop in pending home sales recorded in April (pending sales numbers generally manifest two months down the road).

June’s sales pace of 4.77 million for the year is the lowest it’s been since last November. Without a convincing rebound in the months ahead, 2011 is in step to be the fourth time in the last five years where home sales have declined on an annual basis. There were 4.90 million existing homes sold in 2010, according to NAR’s data.
The Realtor group blamed June’s disappointing results, at least in part, on a large number of sales contracts that have fallen through.

“Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month,” said Lawrence Yun, NAR’s chief economist.

“The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year,” Yun said.

Ron Phipps, NAR’s president, added that lower mortgage loan limits, due to go into effect on October 1, already are having an impact.

“Some lenders are placing lower loan limits on current contracts in anticipation they may not close before the end of September,” Phipps said. “As a result, some contracts may be getting cancelled because certain buyers are unwilling or unable to obtain a more costly jumbo mortgage.”

With fewer discounted, distressed properties trading hands, NAR’s data showed that the national median existing-home price rose to $184,300 in June, up more than 10 percent from May and up 0.8 percent from a year earlier.

Total housing inventory at the end of June rose 3.3 percent to 3.77 million existing homes available for sale, which represents a 9.5-month supply at the current sales pace. That’s up from a 9.1-month supply in May.

URL to original article: http://www.dsnews.com/articles/distressed-properties-account-for-smaller-share-of-declining-home-resales-2011-07-20

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