Home Resales Down From Record, Price Gains Continue to Roll

Home Resales Down From Record, Price Gains Continue to Roll

WASHINGTON (August 23, 2005) – Existing-home sales declined in July from a record in June, but home prices continue to rise at double-digit rates, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – slipped 2.6 percent in July to a seasonally adjusted annual rate* of 7.16 million from an upwardly revised record of 7.35 million in June. Sales were 4.7 percent higher than the 6.84 million-unit pace in July 2004.

David Lereah, NAR’s chief economist, said home sales remain in historic territory. “The level of existing-home sales in July was the third highest on record,” he said. “This is a big number any way you slice it, and housing is continuing to stimulate the overall economy.” The second highest level of sales activity ever recorded was in April of this year, with a pace of 7.18 million units.

The national median existing-home price for all housing types was $218,000 in July, up 14.1 percent from July 2004 when the median price was $191,000. The median is a typical market price where half of the homes sold for more and half sold for less.

Lereah noted that the strongest rates of price growth tend to move geographically. “In examining the hottest markets for home price appreciation, we see a rolling boom moving from one metro area to another over time, as well as a spillover effect into nearby areas with lower home prices,” he said. “This is spreading the wealth of housing returns, with a natural easing of appreciation in areas following a period of extraordinary price growth. Even after slowing in a given area, prices typically have continued to rise faster than historic norms.” Over the last four-and-a-half years of record home sales, no area that has experienced a sustained period of double-digit price growth has later seen a price decline.

NAR President Al Mansell of Salt Lake City said the rate of price growth is a simple reflection of supply and demand. “Housing inventory levels improved in July, but they’re still quite lean by historic standards,” he said. “If the supply of homes rises, it should reduce competition between buyers and take some of the pressure off of prices. Even so, we expect home price appreciation to remain above normal over the next year.”

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Total housing inventory levels rose 2.6 percent at the end of July to 2.75 million existing homes available for sale, which represents a 4.6-month supply at the current sales pace.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.70 percent in July, up from 5.58 percent in June; the rate was 6.06 percent in July 2004.

After hitting four consecutive monthly records, existing condominium and cooperative housing sales declined 5.0 percent to a seasonally adjusted annual rate of 915,000 units from an upwardly revised level of 963,000 in June. Last month’s sales pace remained 8.4 percent above the 844,000-unit level in July 2004. The median condo price was $219,300, up 11.3 percent from a year ago.

Single-family home sales eased by 2.3 percent to a seasonally adjusted annual rate of 6.24 million in July from an upwardly revised record of 6.39 million in June, and were 4.0 percent above the 6.00 million-unit pace in July 2004.
The median single-family home price was $217,900 in July, up 14.6 percent from a year ago.

Regionally, total existing-home sales in the South were unchanged in July, holding at a record level of 2.74 million units, and were 5.0 percent higher than a year earlier. The median price of an existing home in the South was $187,000, up 7.5 percent from July 2004.

Existing-home sales in the Midwest slipped 1.8 percent to an annual sales rate of 1.61 million in July, and were 2.5 percent higher than July 2004. The median price in the Midwest was $178,000, which was 11.9 percent higher than a year ago.

Total existing-home sales in the Northeast declined 3.3 percent to an annual pace of 1.19 million in July, and were 6.3 percent above the same month a year ago. The median existing-home price in the Northeast was $251,000, up 13.1 percent from July 2004.

In the West, existing-home sales fell 7.5 percent to a level of 1.61 million units in July, and were 3.2 percent higher than July 2004. The median existing-home price in the West was $319,000, up 16.0 percent in the last year.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1 million members involved in all aspects of the residential and commercial real estate industries.
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* The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
Because there is a concentration of condos in high-cost metro areas, the national median condo price is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

Existing-home sales for August will be released September 26. The next Pending Home Sales Index will be on September 1 and the forecast will be revised September 7.

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