June Existing Home Sales

The National Association of Realtors (NAR) reported that existing home sales failed to rebound in June from a terrible reading in May.  The weak numbers were exacerbated by higher than expected contract cancellations.  Seasonally adjusted the annualized rate dropped to 4.77 million units after reading 4.81 million the month before.  Month-over-month the pace fell 0.8 percent, 8.8 percent from a year ago.

The NAR chief economist, Lawrence Yun, is pinning some of the blame for the high rate of cancellations on banks because of their “tight credit and low appraisals.”  Procuring a loan may be tough, but those able to meet the strict standards are rewarded with a national average commitment rate for 30-year conventional, fixed rate mortgage 4.51 percent, the lowest so far this year.  Since 1971, there have only been four months that have had a lower rate, all last year.  The bulk of existing home buyers were already existing home owners.  First-time home buyers represented just 31 percent of the total, down from 43 percent a year ago when a tax credit was being offered to purchasers without homeowner experience.  At $184,300, the median price of a home increased by 0.8 percent.

There is a lot of economic activity that comes along with the purchase of a home.  First, realtors are paid; and often furniture and floorings are purchased or landscape is completed. The housing industry provided a foundation for the last economic expansion.  This foundation has been shaken and continues to be unstable. It is likely the rest of the economy will remain fragile so long as this understructure remains under pressure.