EmailExisting home sales fell for the third consecutive month, declining from 4.81 million in May to 4.77 million in June. The Briefing.com consensus expected sales to increase to 4.93 million.
The National Association of Realtors (NAR) blamed a surge in contract cancellations as the primary reason for sales coming in below expectations. Even though the latest pending home sales index -- which measures signed contracts -- jumped 8.2%, 16% of realtors reported a sales contract was canceled in June, up from 4% in May. Cancellations had been trending steadily lower for the past year.
There is no clear evidence that explains why the spike in cancellations occurred. Nevertheless, NAR expects cancellation rates to return toward May levels in July and to help boost sales next month.
Even if NAR is correct in its assumption, there is still little reason to believe strong growth in home sales will occur in the near future. The underlying fundamentals in the economy are still not attractive for home buying. This includes increasing unemployment, declining incomes, and tight credit conditions.
On a slightly positive note, distressed property sales accounted for only 30% of all sales in June, down from 31% in May and 32% in June 2010. Since distressed properties are typically sold at a 20% or more discount to similar existing homes, the drop in distressed sales helped boost prices 0.8% y/y to $184,300 in June. The growth in housing prices will also aid homebuilders as the premium for a newly built home is expected to shrink.
Total housing inventories increased to a 9.5 month supply in June from a 9.1 month supply in May. This is the largest inventory level since November 2010.
