Real estate closings drop, still up annually
Today, the National Association of Realtors is reporting that existing home sales (closed transactions) dropped three percent in September from August, noting a “strong gain” in August. Existing home sales rose 11.3 percent from September 2010, however, a positive sign for the housing sector after many industry challenges including difficulty in getting contracts through lending and closed.
NAR members still cite contract failures as one of their top challenges, with the number of members saying it presents a problem nearly doubling since September 2010. Contract failures, according to NAR include “declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses.”
Who are the buyers, what are they buying?
Who is actually buying? Cash sales account for one in three homes sold in September and investors accounted for 19 percent of homes sold. The level of investor activity has remained relatively the same over the past twelve months. First time buyers made up a third of all sales, also unchanged from August. Sales show consumers are looking for a bargain as 30 percent of sales were for distressed homes, but sales have dropped five percent over the last year, possibly because of contract failures and difficulty with banks.
The national media price for existing homes was $165,400 in September, a 3.5 percent drop in values from September 2010. The current inventory level is at an 8.5 month supply and the total housing inventory dropped 2.0 percent in September.
NAR points out a major irony
Dr. Lawrence Yun, NAR chief economist, said the market has been stable although at low levels, and there is plenty of room for improvement. “Existing-home sales have bounced around this year, staying relatively close to the current level in most months,” he said. “The irony is affordability conditions have improved to historic highs and more creditworthy borrowers are trying to purchase homes, but the share of contract failures is double the level of September 2010. Even so, the volume of successful buyers is higher than a year ago and is remaining fairly stable – this speaks to an unfulfilled demand.”
NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said access to credit is unbalanced. “All year we’ve been discussing the fact that many creditworthy home buyers are being denied mortgages,” he said. “On top of that, loan limits have been lowered, which means buyers of higher priced homes, including many in more expensive housing markets, now have to pay a higher interest rate for a jumbo mortgage than buyers who can qualify for a conventional loan. We need to remove the roadblocks to a housing recovery – not place more obstacles in the way of financially qualified buyers.”
