Mortgage Problems Chip Away at August Home Sales
Existing-home sales fell in August, which coincided with the peak of mortgage availability problems, according to the NATIONAL ASSOCIATION OF REALTORS®.
Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — were down 4.3 percent to a seasonally adjusted annual rate of 5.5 million units in August from a level of 5.75 million in July. That represents 12.8 percent below the 6.31 million-unit pace in August 2006.
“The unusual disruptions in the mortgage market, including a significant rise in jumbo loan rates, resulted in a fairly high number of postponed or cancelled sales, with many buyers having to search for other financing when loan commitments fell through,” says NAR’s Senior Economist Lawrence Yun. “Lower sales contributed to a build up of unsold inventory.”
Yun expects similar results for home sales in September. “Once we get through these disruptions, we’ll get a better sense of where the actual market is in late fall as conditions begin to normalize,” he says.
Better Times Ahead?
Total housing inventory rose 0.4 percent at the end of August to 4.58 million existing homes available for sale, which represents a 10-month supply at the current sales pace, up from a 9.5-month supply in July.
Nevertheless, NAR President Pat V. Combs says there is good news: The mortgage picture is showing signs of improving. “Mortgage interest rates have been declining and loan availability is improving,” she says. “Movements to enhance the FHA loan program and to raise the limits for conventional financing could provide additional relief, and it looks like the worse of the mortgage availability problem is behind us.”
Also, she notes, the abundant choice of homes is giving buyers an opportunity to better negotiate price and terms. “There are good opportunities in the market now, especially for first-time buyers,” Combs says.
A Closer Look at the Numbers
The national median existing-home price for all housing types was $224,500 in August, up 0.2 percent from August 2006 when the median was $224,000. The median is a typical market price where half of the homes sold for more and half sold for less.
“Price gains in the Northeast and Midwest were largely offset by a decline in the West, while the median existing-home price in the South was down slightly,” Combs says.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.57 percent in August, down from 6.7 percent in July; the rate was 6.52 percent in August 2006. Last week, Freddie Mac reported the 30-year fixed rate was down to 6.34 percent.
Meanwhile, single-family home sales fell 3.8 percent to a seasonally adjusted annual rate of 4.81 million in August from a pace of 5 million in July. Sales are 13 percent below 5.53 million-unit level in August 2006. The median existing single-family home price was $223,900 in August, which is essentially even with a year ago.
Existing condominium and co-op sales also dropped, falling 8 percent to a seasonally adjusted annual rate of 690,000 units in August from 750,000 in July. They are 11.7 percent lower than the 781,000-unit pace a year ago. The median existing condo price was $228,500 in August, up 2.1 percent from August 2006.
Across the Region
Here’s what happened regionally in the United States with existing-home sales:
Northeast: slipped 2 percent in August to an annual pace of 1 million, which is 5.7 percent below a year ago. Median price: $282,300, up 3.6 percent from August 2006.
South: eased by 2.7 percent to a level of 2.2 million in August, which is 12.7 percent lower than August 2006. Median price: $183,500, down 0.7 percent from a year ago.
Midwest: fell 5.2 percent to an annual rate of 1.28 million in August, and is 10.5 percent below a year ago. Median price: $177,100, up 3.1 percent from August 2006.
West: dropped 9.8 percent in August to a level of 1.01 million, and is 21.7 percent below August 2006. Median price: $332,300, which is 3.8 percent below a year ago.
— REALTOR® Magazine Online
