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Home Price Boost Sends Sales Down in June

Existing-home sales fell 1.2 percent in June to an annual sales rate of 5.08 million as the price of a single-family home rose 13.5 percent from a year earlier--the strongest year-over-year gain since November 2005, the ""National Association of Realtors"":http://www.realtor.org/news-releases/2013/07/june-existing-home-sales-slip-but-prices-continue-to-roll-at-double-digit-rates (NAR) reported Monday.

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Economists surveyed by Bloomberg expected existing-home sales to jump to 5.27 million from May's originally reported sales pace of 5.18 million. May sales were revised down to 5.14 million.

The median price of an existing home rose $11,100 or 5.5 percent for the month to $214,200, the highest price since June 2008.

The inventory of homes for sale rose to 2.19 million from 2.15 million in May, translating to a 5.2 month supply compared with May's 5.0 month supply. Both the May inventory and months' supply were revised down from last month's report.

The monthly decline in sales was only the second this year but was also the largest since the sales pace fell by the same amount in December. The drop in sales came despite an increase in April in NAR’s Pending Home Sales Index, which tracks contracts for existing single-family homes. The index rose in April to 105.7 from 104.1 in March and fell in May.

Nonetheless, the sales pace topped 5 million for the second month in a row for the first time since October-November 2007. June sales were 670,000 or 15.2 percent ahead of sales one year ago. Sales have improved year-over-year for 17 straight months.

Existing-home sales continue to be plagued though by a tight inventory. The number of homes on the market in June was down 180,000 from a year earlier. The months' supply of homes for sale--computed using the homes for sale and the sales pace--rose in June but was down 1.2 months from a year earlier. The months’ supply has been down year-over-year for two straight years.

The median price of an existing single-family home rose for the fifth straight month and has been up on a yearly basis for 16 months in a row.

Even with the June price increase, the median price of an existing single-family home is down 7.0 percent from its July 2006 peak of $230,300.

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The higher prices are driven in part by the relatively tight inventory. Recent increases in mortgage rates could have the offsetting effect of pushing prices down to keep monthly payments affordable while at the same time driving them up as more buyers rush the market to complete transactions before rates rise further.

The median price in June topped $200,000 for second month in a row for the first time since July-August 2008.

Inventories continue to struggle as well with competition with sales of lower priced “distressed” homes. According to the NAR, distressed homes--foreclosures and short sales that typically sell at a reduced price--accounted for 15 percent of June sales, the lowest share since NAR began monthly tracking of such sales in October 2008. Distressed homes accounted for 18 percent of sales in May, unchanged from April, and for 26 percent of all sales in June 2012.

Some of the increase in the median price could be attributable to the lower share of distressed homes sold in June.

NAR said 8 percent of June sales were foreclosures, and 7 percent were short sales compared with 11 percent and 7 percent, respectively, in May. Foreclosures sold for an average discount of 16 percent below market value in June, while short sales were discounted 13 percent. In May, foreclosures sold for an average discount of 15 percent below market value, while short sales were discounted 12 percent.

According to NAR, the median time on market for all homes was 37 days in June, down from 41 days in May and 47 percent faster than the 70 days on market in June 2012. First-time buyers, the association reported, accounted for 29 percent of purchases in June compared with 28 percent in May and 32 percent in June 2012

Despite the recent increase in mortgage rates, all-cash sales made up 31 percent of transactions in June, down from 33 percent in May, NAR reported. All-cash sales were 29 percent in June 2012.

Regionally, existing-home sales fell in three of the four Census regions.

Sales were flat at 1.21 million in the Midwest. The median price rose 6.6 percent for the month in Midwest to $170,100 and is up 8.9 percent in the last year.

Existing-home sales slipped slightly to 2.03 million in the South as the price of an existing single family home rose 5.3 percent to $186,300--up 13.7 percent from a year earlier.

In the West, sales slipped to 1.21 million in June from 1.23 million in May. The median price of a single-family home in the West rose 2.8 percent in June to $282,000, up 19.9 percent from June 2012.

In the Northeast, sales dipped to 630,000 in June from 640,000 in May. The median price of a single family home in the Northeast in June was $270,400, up 4.4 percent from May and up 6.8 percent from June 2012.

_Hear Mark Lieberman every Friday on P.O.T.U.S. Radio, Sirius-XM 124, at 6:20 a.m. Eastern._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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