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Cancelled contracts hit residential property sales in US

Sales gains in the Midwest and South were offset by declines in the Northeast and West. Single family home sales were stable while the condo sector weakened, the report shows.

Total existing home sales, which are completed transactions that include single family, town homes, condominiums and co-ops, fell 0.8% to a seasonally adjusted annual rate of 4.77 million in June from 4.81 million in May, and remain 8.8% below the 5.23 million unit level in June 2010, which was the scheduled closing deadline for the home buyer tax credit.

‘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 economist.

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

‘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,’ he added.

The national median existing home price2for all housing types was $184,300 in June, up 0.8% from June 2010. Distressed homes, that is foreclosures and short sales generally sold at deep discounts, accounted for 30% of sales in June, compared with 31% in May and 32% a year ago.

NAR president Ron Phipps 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. Even with job creation below expectations, excessively tight loan standards are keeping many buyers from completing deals,’ he explained.

‘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,’ he said.

Phipps added that lower mortgage loan limits, due to go into effect on October 01, 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. As a result, some contracts may be getting cancelled because certain buyers are unwilling or unable to obtain a more costly jumbo mortgage,’ he said.

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

All cash transactions accounted for 29% of sales in June compared with  30% in May and 24% in June 2010. Investors account for the bulk of cash purchases. First time buyers bought 31% of homes in June, down from 36% in May and less than the 43% recorded a year ago when the tax credit was in place.

The balance of sales was to repeat buyers, which were a 50% market share in June, up from 45% in May, which appears to be a normal seasonal gain.

Single family home sales were unchanged at a seasonally adjusted annual rate of 4.24 million in June, but are 7.4% below a 4.58 million pace in June 2010. The median existing single family home price was $184,600 in June, up 0.6% from a year ago.

Existing condominium and co-op sales fell 7% to a seasonally adjusted annual rate of 530,000 in June from 570,000 in May, and are 18% below the 646,000 unit level a year ago. The median existing condo price was $182,300 in June, up 1.8% from June 2010.

Regionally, existing home sales in the Northeast fell 5.2% and are 17% below June 2010. The median price in the Northeast was $261,000, up 3.1% from a year ago. Existing home sales in the Midwest rose 1% in June but are 14% below a year ago. The median price in the Midwest was $147,700, down 5.3% from June 2010.

In the South, existing home sales increased 0.5% but are 5.6%  below June 2010. The median price in the South was $159,100, down 0.1% from a year ago. Existing home sales in the West declined 1.7% to an annual pace of 1.14 million in June and are 2.6% below a year ago. The median price in the West was $240,400, up 9.5% from June 2010.