Realtors Say Home Prices Took Another Hit

San Antonio, Texas

Median existing-home prices declined modestly in the second quarter with 27 percent of metropolitan areas experiencing price gains from a year ago, while state home sales declined from the second quarter of 2010, according to the latest quarterly report by the National Association of Realtors.

The median existing single-family home price rose in 41 out of 151 metropolitan statistical areas1 (MSAs) in the second quarter from the same period in 2010, including four with double-digit increases; one was unchanged and 109 areas showed price declines. In the first quarter, 34 metro areas had posted gains from a year earlier.

Lawrence Yun, NAR chief economist, said home prices have been moderating. “Median home prices have been moving up and down in a relatively narrow range in many markets, which shows a stabilization trend,” he said. “Markets showing consistent price stability or increases are those with solid labor market conditions, such as in Washington, D.C.; San Antonio; or Fargo, N.D.”

Yun noted the median price measurement reflects the types of homes that are selling during the quarter and can be misleading at times. “The level of foreclosures, which can artificially depress median prices, can vary notably in given markets. The annual price gauge smoothes out the quarterly swings and has shown fairly stable price trends in most markets.”

He added the housing market should be stronger. “With home prices in a broad trough and historically low mortgage interest rates, high housing affordability conditions and rising rents could stimulate a more rapid sales recovery if banks get back into the business of lending to more creditworthy borrowers,” Yun said.

NAR’s Housing Affordability Index stood at 176.6 in the second quarter, the third highest on record after the first quarter of 2011 and fourth quarter of 2010. The index measures the relationship between median home price, median family income and mortgage interest rates; the higher the index, the greater household purchasing power. Record keeping began in 1970.

The national median existing single-family home price was $171,900 in the second quarter, down 2.8 percent from $176,800 in the second quarter of 2010. The median is where half sold for more and half sold for less. Distressed homes,2 typically sold at a discount of about 20 percent, accounted for 33 percent of second quarter sales, down from 39 percent in the first quarter; they were 32 percent a year earlier.

Total state existing-home sales, including single-family and condo, declined 5.4 percent to a seasonally adjusted annual rate3 of 4.86 million in the second quarter from 5.14 million in the first quarter, and were 12.7 percent below a 5.57 million pace during the second quarter of 2010. June 2010 was the closing deadline for the home buyer tax credit.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said the key to healthy housing is credit access. “It’s frustrating for many creditworthy potential home buyers to realize that when they’re ready to make a move, banks remain risk averse,” he said. “People with good jobs, long-term plans and who are willing to stay well within their means deserve an opportunity to realize their American dream of home ownership. When banks return to normal and safe but sensible lending standards, housing will be able to contribute its traditional share to economic growth.”

Yun clarified the point on economic growth. “The direction of the economy will be determined principally by the housing market recovery, and indications now are pointing toward only a modest recovery,” he said.

The share of all-cash home purchases was 30 percent in the second quarter, up from 25 percent in the second quarter of 2010. Investors, who make up the bulk of cash purchasers, accounted for 19 percent of second quarter transactions, up from 14 percent a year ago.

First-time buyers purchased 35 percent of homes, down from 46 percent in the second quarter of 2010. Repeat buyers accounted for a 56 percent market share in the second quarter, up from 40 percent a year earlier.

In the condo sector, metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $169,200 in the second quarter, which is 3.5 percent below the second quarter of 2010. Fourteen metros showed increases in the median condo price from a year ago and 40 areas had declines.

Regionally, the median existing single-family home price in the Northeast rose 2.0 percent to $245,600 in the second quarter from a year ago. Existing-home sales in the Northeast declined 4.6 percent in the second quarter to a level of 763,000 and are 19.9 percent below the second quarter of 2010.

The median existing single-family home price in the Midwest fell 5.4 percent to $139,800 in the second quarter from the same period in 2010. Existing-home sales in the Midwest were down 3.1 percent in the second quarter to a pace of 1.05 million and are 18.3 percent below a year ago.

In the South, the median existing single-family home price declined 2.7 percent to $153,000 in the second quarter from a year earlier. Existing-home sales in the South fell 3.4 percent in the second quarter to an annual rate of 1.89 million and are 9.9 percent below the second quarter of 2010.

The median existing single-family home price in the West declined 3.1 percent to $218,000 in the second quarter from the second quarter of 2010. Existing-home sales in the West dropped 10.8 percent in the second quarter to a level of 1.16 million and are 6.2 percent below a year ago.

June Existing-Home Sales Slip Nationally, Improve in Texas Cities

Existing-home sales eased nationally in June as contract cancellations spiked unexpectedly, although prices were up slightly, according to the National Association of Realtors®. The numbers were better in the Dallas Metro with the median price increasing year-over-year and a .4 percent increase in price and a 3.1 percent increase in sales over June, 2010. I the same period, Houston experienced a 1.6 percent increase in price and a .3 percent drop in sales. San Antonio did the best among Texas Cities cited in the report with a 3.6 percent increase in price and a 1.6 percent increase in sales. 

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.

Total existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, declined 0.8 percent to a seasonally adjusted annual rate of 4.77 million in June from 4.81 million in May, and remain 8.8 percent below the 5.23 million unit level in June 2010, which was the scheduled closing deadline for the home buyer tax credit.

Lawrence Yun, NAR chief economist, said this is an uneven recovery. “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.”

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.”

The national median existing-home price for all housing types was $184,300 in June, up 0.8 percent from June 2010. Distressed homes3 – foreclosures and short sales generally sold at deep discounts – accounted for 30 percent of sales in June, compared with 31 percent in May and 32 percent in June 2010.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.51 percent in June, down from 4.64 percent in May; the rate was 4.74 percent in June 2010.

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.”

Phipps added that lower mortgage loan limits, due to go into effect on October 1, 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 percent to 3.77 million existing homes available for sale, which represents a 9.5-month supply4 at the current sales pace, up from a 9.1-month supply in May.

All-cash transactions accounted for 29 percent of sales in June; they were 30 percent in May and 24 percent in June 2010; investors account for the bulk of cash purchases.

First-time buyers purchased 31 percent of homes in June, down from 36 percent in May; they were 43 percent in June 2010 when the tax credit was in place. Investors accounted for 19 percent of purchase activity in June, unchanged from May; they were 13 percent in June 2010.

The balance of sales was to repeat buyers, which were a 50 percent market share in June, up from 45 percent 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 percent below a 4.58 million pace in June 2010. The median existing single-family home price was $184,600 in June, up 0.6 percent from a year ago.

Existing condominium and co-op sales fell 7.0 percent to a seasonally adjusted annual rate of 530,000 in June from 570,000 in May, and are 18.0 percent below the 646,000-unit level a year ago. The median existing condo price5 was $182,300 in June, up 1.8 percent from June 2010.

Regionally, existing-home sales in the Northeast fell 5.2 percent to an annual pace of 730,000 in June and are 17.0 percent below June 2010. The median price in the Northeast was $261,000, up 3.1 percent from a year ago.

Existing-home sales in the Midwest rose 1.0 percent in June to a pace of 1.04 million but are 14.0 percent below a year ago. The median price in the Midwest was $147,700, down 5.3 percent from June 2010.

In the South, existing-home sales increased 0.5 percent to an annual level of 1.86 million in June but are 5.6 percent below June 2010. The median price in the South was $159,100, down 0.1 percent from a year ago.

Existing-home sales in the West declined 1.7 percent to an annual pace of 1.14 million in June and are 2.6 percent below a year ago. The median price in the West was $240,400, up 9.5 percent from June 2010.

June 4-5 is National Open House Weekend

Warren Buffet says be fearful when others are greedy and greedy when others are fearful. Folks at the National Association of Realtors hope you lose a little fear. In order to help, they're hosting a national open house weekend June 4-5.

During the weekend, Realtors® will hold open houses in local neighborhoods throughout the country. During the weekend Realtors® will be on hand to provide guidance and insights into the social and financial benefits of home ownership.

According to a recent nationwide Pew Research Center survey, eight in 10 adults agree that buying a home is the best long-term investment a person can make. In addition, a strong majority of renters -- 81 percent -- said they would prefer to one day buy a home, demonstrating the value Americans continue to place on home ownership.

Find Open Houses in Dallas