Sales in June fell a little more than 1% from the previous month, but they were about 15% higher than in June 2012. Based on the data so far this year, I would expect the total number of existing home sales for 2013 to be somewhere in the range of 4.5 million to 5 million homes. This appears to be the "new normal". One positive note for the mortgage industry is that the percentage of homes sold to investors has dropped to 20%, meaning that the share of cash sales is declining.
The National Association of Realtors also reported that inventory levels improved slightly, to a 5.2 month supply. They also said that the median price of homes sold in June was $214,200 – a 13.5% increase from the previous year. The NAR is very concerned about inventory levels, and is afraid that a continued short supply of homes for sale will cause "unsustainable" price increases that, combined with rising mortgage interest rates, could cause the housing recovery to stall.
New housing starts, according to the Commerce Department, also fell – by 10% in June from the previous month. (Much of that, but not all, was due to a fall in multifamily housing starts.)
The percentage of existing homes sold that were distressed – foreclosures or short sales – fell to 15% of total homes sold. This is good news, but we should also be aware that, according to CoreLogic, we continue to see about 50,000 new foreclosures every month. (The number was 55,000 in June.) This is much better than it was during the bust, of course, but is still significantly higher than what would be considered normal. The foreclosures we are seeing today are not a result of irresponsible lending practices, but rather are a reflection of a troubled economy in general.
The recent rise in mortgage interest rates does not seem to have scared people away from buying homes; in fact, it looks like the rise in rates has moved many homebuyers off the fence.
If rates continue to rise (and I think that's a good bet, particularly toward the end of this year or the beginning of next year), I would expect rising rates to put downward pressure on home prices – especially if inventory levels go higher.
There are 2 things that will affect inventory levels, in terms of the number of months of supply. One of those things is whether we begin to see more people putting their homes on the market. If you owned a $350,000 home in 2007, and saw the value of that home drop to $250,000 or lower, you took a $100,000 hit to your net worth.
For most people, that's pretty hard to get over. Multiply by millions of homes, and you begin to get a sense of the scope of the financial disaster created by politicians' search for that utopia of "affordable housing". So as a result, we have millions of homeowners who would otherwise have sold by now for one reason or another, who are standing pat and waiting for the value of their home to at least reach the level it was at in 2007. More than anything else, this is the reason we don't have more inventory.
The other thing that would encourage homeowners to put their homes on the market would be in increase in the number of buyers actively looking to buy.
Forward-looking loan originators can help with both: they can help educate potential buyers to recognize that, if they're qualified to buy today, waiting is not in their best interests. And they can help potential sellers do a rational analysis of the pros and cons of putting their homes on the market today -- rather than waiting for home prices to reach the peak boom levels of 2007 -- something that (especially corrected for inflation) may not happen for a long time.
My next free online seminar for loan originators: "How to Get Appointments with Realtors" will be on Thursday, August 15th at 3 PM Eastern time (12 Noon Pacific). Go here for information, and to register.