Residential property sales in the United States in July fell 12.7% from the previous month, according to the latest survey of 53 cities across the country.
The report from RE/MAX said that lack of lending continues to affect the market and concern about the economy and bad appraisals are preventing transactions going through.
A similar picture emerges from the latest monthly report from the National Association of Realtors that shows that existing home sales dropped by 3.5% in July. RE/MAX also said many lenders are already using the lower loan limits for government guaranteed or insured mortgages set to take effect in October.
RE/MAX though also pointed out that sales are strong and are 13.1% above levels a year ago, and the median price dropped 4.6%, the smallest yearly decline in six months.
Prices actually increased in four of the last five months, allowing Margaret Kelly, the CEO of RE/MAX to stay optimistic.
’The fact that July home sales were higher than a year ago, and by such a significant amount, gives us reason for great optimism. Now that prices have risen for four of the past five months, the housing market is beginning to show definite signs of recovery,’ she explained.
NAR also reported that even although declined in July they are still notably higher than a year ago. Total completed sales fell 3.5% to a seasonally adjusted annual rate of 4.67 million in July from 4.84 million in June, but are 21% above the 3.86 million unit pace in July 2010, which was a cyclical low immediately following the expiration of the home buyer tax credit.
Lawrence Yun, NAR chief economist, said it is a lack of lending that is holding the market back from recovery. ‘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,’ he said.
‘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,’ he added.
According to Ron Phipps, NAR President, an unacceptably high number of potential homebuyers are unable to complete transactions. ‘For both mortgage credit and home appraisals, there’s been a parallel pendulum swing from very loose standards which led to the housing boom, to unnecessarily restrictive practices as an overreaction to the housing correction,’ he said.
‘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,’ he explained.
In an environment following a large price correction, Phipps said a price negotiated between a buyer and seller would appear to be a fair market price. ‘Banks frequently request numerous sales comparisons, well beyond the customary three comps used in the past, with little consideration that some of those properties may be discounted foreclosures used to valuate a traditional home in good condition,’ he said.
‘To a great extent, banks are exerting influence on appraised valuations with negative impacts for both home sales and prices,’ he added.