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Property sales decline in US but still well above 2010 levels

All regions show monthly declines except for the West, which continues to show the highest level of sales contract activity.

The Pending Home Sales Index, a forward looking indicator based on contract signings, slipped 1.3% to 89.7 in July from 90.9 in June but is 14.4% above the 78.4 index in July 2010. The data reflects contracts but not closings.

Lawrence Yun, NAR chief economist, said sales activity is underperforming. ‘The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,’ he said.

‘We also need to be mindful that not all sales contracts are leading to closed existing home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process,’ he added.

The PHSI in the Northeast declined 2% to 67.5 in July but is 9.7% above July 2010. In the Midwest the index slipped 0.8% to 79.1 in July but is 18.8% above a year ago.

Pending home sales in the South fell 4.8% to an index of 94.4 but are 9.5% higher than July 2010. In the West the index rose 3.6% to 110.8 in July and is 20.6% above a year ago.

‘Looking at pending home sales over a longer span, contract activity over the past three months is fairly comparable to the first three months of the year, and well above the low seen in April,’ Yun said.
‘The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge. It is now a question of lending standards and consumers having the necessary confidence to enter the market,’ he explained.

Property prices in the country’s major cities increased for the third month in a row in June, according to the latest Standard & Poor’s (S&P)/Case-Shiller home price index.

It found that prices increased in June from May in 19 of the 20 cities tracked, with average price of a home in those cities having appreciated by 3.6% during the second quarter of this year compared to the first three months.

Over the past year, residential property prices in the U.S. have fallen in all 20 cities after adjusting for seasonal factors.

Chicago, Minneapolis, Washington and Boston saw the greatest month on month property price increases, while the smallest price gains were in Las Vegas and Phoenix which have been hit hardest by the property crisis.

‘These shifts [in property prices] suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together,’ said David Blitzer, chairman of the S&P’s index committee.