The Wall Street Journal

 

WASHINGTON — Existing-home sales climbed in July, rising more than expected, but inventories expanded and prices kept dropping.

Home resales rose to a 5.00 million annual rate, a 3.1% increase from June’s revised 4.85 million annual pace, the National Association of Realtors said Monday. June originally was seen slipping 2.6% to 4.86 million.

The median home price was $212,400 in July, down 7.1% from $228,600 in July 2007. The median price in June this year was $215,100.

Falling prices are restraining sales, as would-be buyers wait for a better deal instead of signing on the dotted line. High inventories are driving down prices. Prices must fall further for inventories to recede. Analysts say inventories have a good distance to drop for a signal that price deflation is nearing an end.

Despite the sales increase, inventories of homes rose 3.9% at the end of July to a record-high 4.67 million available for sale, which represented an 11.2-month supply at the current sales pace. There was an 11.1-month supply at the end of June.

“Inventories continue to remain high, which means we are in a buyers’ market,” NAR economist Lawrence Yun said. “Builders need to continue to cut production more.

“We expect more balanced conditions in 2009 and will eventually return to normal long-term appreciation patterns,” Mr. Yun said.

Mortgage liquidity is drying up, which is what the results this month of a Federal Reserve survey suggest. Lenders continued in the second quarter of 2008 to tighten their standards on home loans, the Fed’s latest quarterly survey of senior loan officers at U.S. banks showed — signaling the credit crunch hasn’t let up. About 75% said they tightened standards on prime mortgages, up from 60% in the previous survey, released in May.

Aside from tighter loan standards and prices falling under the weight of bloated inventories, a weakening job market hasn’t helped the housing market. The key non-farm payrolls number in the government monthly report on employment has gone down seven times in a row.

The July resales level of 5.00 million reported Monday by NAR was above Wall Street expectations of a 4.92 million sales rate for previously owned homes. The sales level was the highest since 5.03 million in February.

The average 30-year mortgage rate was 6.43% in July, up from 6.32% in June, according to Freddie Mac.

Sales rose 5.9% in the Northeast, 0.9% in the Midwest, and 9.7% in the West. Sales fell 0.5% in the South.