Housing Market Continues to Struggle
Americans bought fewer homes in June than May, indicating the weak economy could make a modest housing recovery choppy.
The National Association of Realtors said Thursday that sales of previously occupied homes fell 5.4 percent in June to a seasonally adjusted annual rate of 4.37 million homes. That’s the fewest since October.
Sales are up 4.5 percent from a year ago, evidence that the market is still recovering. But the annual sales pace is below the 6 million that economists consider healthy.
The June drop in completed re-sales contrasts with more encouraging data that show gains in new residential construction, higher builder confidence and more signed contracts to buy previously owned homes.
“It is only one month and the rest of the housing indicators have all continued to show improvement,” said Jennifer Lee, senior economist at BMO Capital Markets. “Let’s hope this June decline is a blip.”
The number of first-time buyers, critical to a housing recovery, made up just 32 percent of sales. That’s down from 34 percent in May. In healthy markets, first-time buyers make up more than 40 percent of the market.
The median home price rose 5 percent to $189,400. That’s mostly because sales of more expensive homes rose, while sales of cheaper homes fell, the Realtors group said.
Prices are also rising because there are fewer homes for sale. The inventory of unsold homes fell to 2.39 million. It would take six and a half months to exhaust the supply at the current sales pace. That’s just above the six months that economists consider healthy.
Other recent reports have indicated that the housing market is slowly recovering, even as the broader economy struggles. Builders broke ground last month on the most new homes and apartments in four years. And the number of new single-family homes, the bulk of the market, rose for the fourth straight month to the highest level since March 2010.
A report from the Federal Reserve Wednesday found that home sales improved in all 12 of the bank’s districts in June and early July.
More Americans are showing interest in buying homes, boosting builder confidence. The National Association of Home Builders/Wells Fargo builder sentiment index jumped to 35 this month, its highest level in five years. Builders said they are seeing more traffic from prospective customers.
Still, the index remains below 50, the level that indicates builder sentiment is in positive territory. It hasn’t reached that level since April 2006, the height of the housing bubble.
There are also fewer homes for sale, which is spurring more home building and raising the prices of those that are on the market.
The housing market is also being supported by record-low mortgage rates. The average rate on the 30-year fixed mortgage fell this week to 3.53 percent, the lowest since long-term mortgages began in the 1950s.
But even with the low rates, many would-be buyers are having difficulty qualifying for home loans or can’t afford the larger down payments being required by banks.
And the job market has weakened considerably in recent months, threatening the recovery in housing. Employers added just 80,000 jobs in June. Job gains averaged only 75,000 in the April-June quarter, after averaging 226,000 in the first three months of the year. The unemployment rate is stuck at 8.2 percent.
Without more job growth, consumers may feel less secure about their financial futures and delay purchasing a new home.
(Copyright 2012 by The Associated Press. All Rights Reserved.)