The Wall Street Journal

20 July 2011

Sales of previously occupied homes in the U.S. dipped in June to the lowest level in seven months amid weakness in the job market and overall economy.

Existing-home sales decreased 0.8% from a month earlier to a seasonally adjusted annual rate of 4.77 million, the National Association of Realtors said Wednesday. It was the third-straight monthly drop. May’s sales pace was unrevised at 4.81 million per year.

The results were worse than forecast. Economists surveyed by Dow Jones Newswires had expected home sales to rise by 1.9% to an annual rate of 4.90 million.

Lawrence Yun, NAR’s chief economist, attributed the poor results to “a very weak economy leading to weak sales.” He also said 16% of buyers who signed contracts for properties wound up canceling them in June — up from a typical level of 10%. The reason for the high level of cancellations remains a mystery, he said.

The median sales price was $184,300, up 0.8% from $182,900 a year earlier.

The inventory of previously owned homes listed for sale, meanwhile, grew at the end of June to 3.8 million. That represented a 9.5-month supply at the current sales pace, compared a healthy level of about six months.

The struggling housing market is one of several key burdens on the slowing economy.

Though construction of single-family homes and overall home construction were up from a month earlier last month, it was still the second-worst June for single-family construction on records dating back to 1959, the Commerce Department said Tuesday.

Demand for apartments has been strong of late as more families opt to rent rather than buy. But the market for previously occupied homes has been far softer amid an oversupply of foreclosed properties. About 2.2 million properties have been foreclosed but have yet to go up for sale, according to Lender Processing Services Inc.

Government incentives, such as a tax credit that mainly benefited first-time home buyers helped home sales last year. But the housing market has faltered since it expired.

The housing sector faces even more trouble this fall when the maximum size of loans that can be backed by government controlled mortgage companies Fannie Mae, Freddie Mac and the Federal Housing Administration goes down.

Economists say stronger income and job growth are needed to spur more families to buy homes and work through the massive inventory of foreclosures.

The Realtors’ report said home sales fell last month compared with a month earlier in two out of four regions. Sales were down 5.2% in the Northeast and 1.7% in the West. They were up 0.5% in the South and 1.0% in the Midwest.