Investors Continue To Dominate Housing Market

Surprising almost no one, the National Association of Realtors reports sales of existing homes fell again in June, although prices were up slightly.

With many would-be homebuyers sidelined by tough lending standards, investors once again were the dominate influence in the market. The numbers show that distressed sales amounted to 30 percent of the market and that 29 percent of buyers paid in cash, without a mortgage.

Those last two statistics very neatly coincide – as they have for nearly every month this year – indicating that it's investors who are both keeping the housing market afloat, but at the same time holding down prices by driving hard bargains on distressed properties.

Sales drop 0.8 percent

In June, total existing-home sales, 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.

The national median existing-home price for all housing types was $184,300 in June, up 0.8 percent from June 2010. With nearly a third of sales in the distressed property-bargain category, the fact that the median price rose may be cause for optimism. But there are equally troubling signs on the horizon.

NAR chief economist Lawrence Yun says there was an unusual spike in contract cancellations last month. Sales contracts signed in May fell through before it was time to close.

Mystery

“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 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 supply at the current sales pace, up from a 9.1-month supply in May.

“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.”