Home Sales Slump Unexpectedly in July

Across the United States, sales of existing homes fell unexpectedly in July, as strict lending and low appraisals prevented consumers from scooping up some of the cheapest houses since 1970. Home sales rose in the Northeast and Midwest, but the gains were offset by declines in the West and South. Distressed homes, which include foreclosures, accounted for 29% of sales in July.

The fall in home prices across the country now totals about $1.3 trillion of lost home equity just over one year. If this continues, the result will be about $2 trillion sliced out of the U.S. economy when it needs several trillion dollars of new credit each year just to keep going.

In the Sarasota - Bradenton Florida market, there were 599 closings in July including 445 single-family homes and 154 condo, down from over 700 in four of the first 6 months of 2011. In June, home sales had reached 728 during the height of the spring buying season, a pattern, which according to Connie Belmont, a Sarasota homes for sale specialist, that has been evident for the past few years.

On a brighter note, the percentage of distressed home sales in the Sarasota market (short sales and foreclosure sales) remained at 38% of the July 2011 sales down from as high as 47% in February, 2011.

Nationwide, sales of previously-owned homes tumbled 3.5% last month to an annual rate of 4.67 million, down from 4.84 million in June, according to the National Association of Realtors (NAR) and Brian Ward, a respected Bradenton FL real estate agent with Keller Williams Realty. The national median home price in July was $174,000, down 4.4% from a year earlier.

Plans for new home construction were also weaker than expected in July after showing some strength in June. Economists were surprised by the slump as they had expected July sales to come in at a much higher rate of 4.87 million homes.

"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," Yun said.

"While the struggling housing market has made buying a home increasingly affordable for consumers, many just cannot get financing from lenders to make the purchase," said 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 economic activity and create jobs," he added.

"Contract failures across the nation, largely caused by rejected mortgage applications and appraisals below the negotiated price, were unchanged in July from the earlier month. Nearly 10% of Sarasota Florida Realtors reported that one or more sale contracts had been delayed or lost in the past 3 months because of low appraisals," said Dick Plumb, another well-known Bradenton real estate agent. Nationwide, 13% of Realtors reported that sasles contracts had to be re-negotiated down to a lower sales price because an appraisal came in below the price initially agreed upon.

It is clear that the housing problem in the U.S. has not gone away and is, in fact, still a long way away from anything that looks or feels like good news and/or stability. "Conversely, for those with cash and a good deal of risk-tolerance," says Cheryl Stimac from the Tampa real estate market, "there are homes priced at bargain levels all across the United States and a few investors are taking advantage of those bargains." Investors, both domestic and foreign buyers, may be the one piece of good news in the U.S. real estate market today.