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Existing home sales slide due to unexpected contract cancellations

Seattle real estate signs, photo by AR McLin.

Existing home sales down

Existing home sales dropped in June, as “contract cancellations spiked unexpectedly, although prices were up slightly,” according to the National Association of Realtors.

Sales varied between regions and despite a slight rise in sales in the South and Midwest of 0.5% and 1.0% respectively, sales declined 5.2% in the Northeast and 1.7% in the West. This puts sales at 17% below June 2010 for the Northeast alone, despite a 3.1 % rise in median price.

Single family home sales stable

NAR reports that single family home sales were relatively stable but the condo sector was weakened with the total existing home sales dropping 0.8% in June and 8.8% from June 2010.

Distressed sales are holding steady, accounting for 30% of all sales while first time buyers account for roughly a third of all sales, both of which reflect similar numbers over the past 12 months.

NAR chief economist notes an uneven recovery

Lawrence Yun, NAR chief economist, said, “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,” he said. “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.”

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Yun cited other factors in the sales performance. “Pending home sales were down in April but up in May, so we may be seeing some of that mix in closed sales for June. However, economic uncertainty and the federal budget debacle may be causing hesitation among some consumers or lenders.”

NAR President looks to Washington

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said home sales should be higher. “With record high housing affordability conditions thus far in 2011, we’d normally expect to see stronger home sales,” he said. “Even with job creation below expectations, excessively tight loan standards are keeping many buyers from completing deals. Although proposals being considered in Washington could effectively put more restrictions on lending, some banking executives have hinted that credit may return to more normal, safe standards in the not-too-distant future, but the tardiness of this process is holding back the recovery.”

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

30 Comments

30 Comments

  1. Sheila Rasak

    July 20, 2011 at 12:42 pm

    I can't help but think that there's a combination of sorts going on here when I look at the Ventura County area. I'm seeing multiple bidding wars on my REO and short sale listings, however, I find that when I represent my buyers, I'm usually the odd man out if I represent someone who is qualified but goes FHA for financing.

    I recently had a couple decline to even view a standard sale as they feel defeated after being declined on 5 offers. Our last offer was on a standard sale where we offered $25k over list price but the investor group went with another offer.

    These buyers have been in the game for over 6 months having had one credit glitch that took weeks to resolve. They had a credit card that showed a balance due of around $55 for the annual fee. The problem was that the buyer didn't even realize that he had the credit card to begin with.

    Tight lending standards? Yes. I made the mistake of test driving a Ferrari and I just can't but help feel that someone is going to report it to the credit bureau.

  2. Ruthmarie Hicks

    July 21, 2011 at 1:05 pm

    I see a giant case of cold feet. This IS the time to buy…most people know it is in their hearts – but they can't help but hope that they can really make a killing if they wait. Might be so in other parts of the country – all real estate is local – but around here – not likely. Most will be kicking themselves for not gobbling up property during this period.

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