Rise in Sales of Previously Owned Homes

Sales of previously owned homes notched another rise in July, and prices showed annual gains for the fifth consecutive month, the latest evidence that Americans are starting to wade back into the housing market.

The National Association of Realtors said that sales of existing homes were running at a seasonally adjusted annual rate of 4.47 million units in July, up 2.3% from June and 10.4% from a year earlier.
Sales of previously occupied homes in the U.S. are up from July and more than 10% above a year ago, a sign of strength for a part of the economy that is starting to recover from a severe downturn.
Thomas Lawler, an independent housing economist, said demand has been especially strong in areas where prices fell sharply during the housing bust, indicating that buyers believe prices are now at attractive levels. Rising employment and low interest rates also are stimulating demand. The Realtors data accounts for completed transactions of single-family homes, townhouses and condominiums and reflects closed contracts, the majority of which originated at the start of the busy spring selling season.
The pickup in sales was reflected in three of the nation’s four regions—sales were unchanged in the West—and across all types of housing, with condominiums leading the way. The Realtors data showed that sales of single-family houses rose 9.9% from last year, while condo sales jumped 14%.
Lawrence Yun, the Realtors’ chief economist, noted demand for homes is strengthening despite tight lending standards and low inventory of homes available for sale. “Without those frictions, we’d be seeing much faster recovery,” he said.
Mr. Lawler agreed, noting sales could have been even stronger if more low-priced foreclosed properties had been available for sale. “There’s been a dramatic drop in distressed and especially foreclosed property sales,” he said. In July, distressed sales accounted for 24% of all transactions, down from 33% last year. Distressed sales include foreclosures and short sales, where the bank agrees to sell the home for less than the outstanding mortgage amount.
But supply is also low because some potential sellers are reluctant to put their homes on the market now, hoping for higher prices later. July inventory fell to about 2.4 million available units, down 23.8%from a year earlier.
Some analysts believe that the low inventory of existing homes is partly fueling strong sales of new homes. Toll Brothers Inc., TOL -1.18%the nation’s largest builder of luxury homes, said that orders for new homes surged 57% in the quarter ended July 31 from a year earlier.
Reduced supply of existing houses for sale is helping to buoy prices, although at an uneven pace. The median price was $187,300 in July, up 9.4% from a year earlier—the fifth consecutive annual gain. But the July price fell slightly from June’s $188,800 level. Month-to-month price changes are notoriously difficult to decipher. A decline could mean that overall values fell, or that more lower-priced homes were sold, pulling down the median.”The data month to month is always a little noisy,” Mr. Yun said. “But if you compare it to one year ago, things are steadily improving,” he added.