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U.S. sales of existing homes declined 0.8% in June to a seasonally adjusted annual rate of 4.77 million units, the National Association of Realtors (NAR) reported on July 20. It was the third straight monthly decline, following a 3.8% setback in May and a 1.8% drop in April. Existing home sales were 8.8% below their level one year earlier, and 34.2% below their September 2005 peak. May sales were hurt by weather to an extent, and June sales were affected by an unusual 16% spike in contract cancellations for the month. This may suggest that economic uncertainty and a weak jobs market have increased hesitation among both buyers and lenders. Overall, existing home sales have declined in four of the past five months. June sales were down in the Northeast and West, but increased in the South and Midwest.
Existing condominium and co-op sales dropped 7%, the NAR reported, and single-family home sales were unchanged. First-time home buyers were responsible for 31% of sales, down from 36% in May. Cash transactions accounted for 29% of purchases. The national median home sale price was $184,300-up 8.9% from May and 0.8% from one year earlier.
June's official inventory was 3.77 million homes, up 3.3% from a month earlier. The supply increased to 9.5 months in June from 9.1 months in May at the current sales pace. Distressed sales were about 30% of total sales in June, down from 31% in May. They accounted for 32% of the total in June 2010.
Housing Starts Rise 14.6%
Housing starts jumped 14.6% to an annualized 629,000 units in June, according to the U.S. Census Bureau. The reading was much stronger than the consensus expectation of 575,000. Multifamily starts surged 31.8% over May to 170,000 units, while single-family starts were up 9.4%, to 453,000 units. All regions showed signs of improvement, with the Northeast leading the pack (up 35.1%, month over month). The West reported the smallest gain (5.4%). On a year-over-year basis, total housing starts were up 16.7%, mainly because of a 104.8% jump in multifamily starts. Single-family starts were up just 0.4% over last June. Building permits, a leading indicator for future construction activity, rose 2.5%, to 624,000 in June.
Mortgage Default Rates Improve
On July 19, S&P Indices and Experian released June data for the S&P/Experian Consumer Credit Default Indices, which measure changes in consumer credit defaults. The indices showed first and second mortgage default rates decreased in June to 2.02% and 1.40%, respectively, from May rates of 2.09% and 1.42%. This data reflects the general downward trend of the past two years. In spite of high unemployment rates, consumers appear to be in better financial positions to pay off their debt, resulting in far lower default rates than during the recession. First mortgage default rates peaked in May 2009 at 5.67%; second mortgage default rates had peaked two months earlier at 4.66%. While still above their 2004-2006 rates, mortgage default rates are well below their crisis highs, a good sign for the housing market.
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