Sales of existing home sales fell in July after two months of gains with tighter lending standards and valuation challenges, but sales increased over July 2010.
In a survey of 53 metropolitan areas, the National Housing Report released by Re/Max found that home sales fell by 12.7% in July from the previous month. On the bright side, the pace of sales in this survey were higher than the previous year for the first time in six months. Sales in July outpaced sales from July 2010 by 13.1%.
The survey stated that contributing the decline in sales were strict lending standards, bad appraisals and concern about the overall economy. Plus, many lenders have already begun using the lower GSE and FHA loan limits that are expected to take effect after September 30, 2011.
“The fact that July home sales were higher than a year ago, and by such a significant amount, gives us reason for great optimism,” said Margaret Kelly, CEO of RE/MAX, LLC. “And now that prices have risen for four of the past five months, the housing market is beginning to show definite signs of recovery.”
After rising for four months, home prices fell slightly in July by 0.18% from June. The median sales price, currently at $193,042, is 4.6% lower than the previous year when the average price was $202,350.
The National Association of Realtors (NAR) also release a report showing a month-over-month decline in home sales, but also showed a significant increase over July of 2010. Monthly sales declined by 3.5% nationally, but were 21% higher then the previous July, according to the NAR survey. The median home price for homes in their survey was $174,000, a decline of 4.4% from the previous year.
Lawrence Yun, NAR chief economist, said there is a tug and pull on the market. “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 credit worthy 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.”
NAR also pointed to issues with valuation creating problems for buyers and sellers. NAR President Ron Phipps stated that he doesn't understand how there can be such a discrepancy between a fair market price negotiated by a buyer and seller and a lower value determination made by appraisers and lenders. “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.”