A dismal existing home sales number rocked the market today but should've been expected given the expired tax credit. July preliminary existing home sales came in at 3,830,000 versus 5,260,000 in June or -27.2%, and -25.5% over 2009. Existing inventory on the market clocked 3,984,000, +2.5% over June but -1.9% over 2009. Given the slower pace of sales, months of inventory on the market rose 40.4% to 12.5 months over June, and 31.6% over July 2009. Prices were relatively stable, we'll see what happens going forward though with the months of inventory on hand. If mortgage rates head on down to 2% that would provide a decent backstop (see the recent 30-Year fixed rate mortgage chart going back to 1975). Here's what Lawrence Yun, chief economist at NAR (National Association of Realtors) had to say and I embedded the existing home sales data below via Scribd. ITB (the US Home Construction ETF) might've already priced the news in, it's up 0.46% to $10.85 (chart below). Looks vulnerable at support though if it rolls over again.
"July Existing-Home Sales Fall as Expected but Prices Rise
Washington, August 24, 2010
Existing-home sales were sharply lower in July following expiration of the home buyer tax credit but home prices continued to gain, according to the National Association of Realtors®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5 percent below the 5.14 million-unit level in July 2009.
Sales are at the lowest level since the total existing-home sales series launched in 1999, and single family sales – accounting for the bulk of transactions – are at the lowest level since May of 1995.
Lawrence Yun, NAR chief economist, said a soft sales pace likely will continue for a few additional months. “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” he said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.
“Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year. To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.56 percent in July from 4.74 percent in June; the rate was 5.22 percent in July 2009. Last week, Freddie Mac reported the 30-year fixed was down to 4.42 percent.
The national median existing-home price2 for all housing types was $182,600 in July, up 0.7 percent from a year ago. Distressed home sales are unchanged from June, accounting for 32 percent of transactions in July; they were 31 percent in July 2009.3
“Thanks to the home buyer tax credit, home values have been stable for the past 18 months despite heavy job losses,” Yun said. “Over the short term, high supply in relation to demand clearly favors buyers. However, given that home values are back in line relative to income, and from very low new-home construction, there is not likely to be any measurable change in home prices going forward.” (source: Realtor.org)
ITB (iShares Dow Jones US Home Construction Index Fund ETF)