Existing home sales fall 3.5% in July

Sales of existing homes in July fell 3.5% from the prior month, as tightened lending standards continue to hurt potential homeowners, according to the National Association of Realtors. The huge trade group said sales of single-family homes, townhomes, condos and co-ops decreased to a seasonally adjusted rate of 4.67 million last month from 4.84 million in June. NAR said July existing home sales were 21% higher than 3.86 million a year ago, which was the cyclical low immediately following the expiration of the homebuyer tax credit. “Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers,” according to NAR Chief Economist Lawrence Yun. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs,” Yun said. NAR said 16% of its members reported contract failures in July, while 9% said a contract was delayed in the past three months due to low appraisals, and 13% renegotiated a deal to a lower price following a appraisal less than the initially agreed price. Paul Dales, senior U.S. economist at Capital Economics, said July’s decline indicates the housing market will not save the economy. “In fact, with home sales now 13.5% below January’s level is it becoming clear that the economic slowdown and drop in confidence is hitting housing demand,” Dales said. “Indeed, part of the fall was due to an unusually high share of previously signed contracts being cancelled.” Ron Phipps, president of NAR and an eponymous realty firm in Warwick, R.I., said the loose underwriting standards of the housing boom have been replaced with “unnecessarily restrictive” lending. “Beyond the tight credit problems, all appraisals must be done by valuators with local expertise and using reasonable comparisons — it doesn’t make sense to consistently see so many valuations coming in below negotiated prices, often below replacement construction costs,” according to Phipps. “To a great extent, banks are exerting influence on appraised valuations with negative impacts for both home sales and prices,” Phipps said. The inventory of existing homes for sale fell 1.7% in July to 3.65 million, representing a 9.4-month supply, according to NAR. That is up from 9.2 months worth of supply in June. The median price on existing home sales fell to $174,000 in July, down 4.4% from a year earlier, according to NAR. Sales of distressed properties accounted for 29% of all sales in July, down from 30% in June and 32% a year ago. Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw