Home sales increase for 4th month in a row

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By David M. Dickson

Sales of previously owned homes increased in July for the fourth month in a row, the first time that streak has been achieved since 2004. The trend signals that the housing market, decimated by the longest and deepest economic downturn since the Great Depression, is finally beginning to recover.

Existing-home sales jumped 7.2 percent in July to an annual rate of 5.24 million, the National Association of Realtors reported Friday. It was the biggest monthly percentage gain since the NAR began compiling comparable records in 1999.

Single-family home sales increased 6.5 percent, while condo sales soared 12.5 percent.

Total existing-home sales last month were 5 percent higher than July 2008 sales, the first time since November 2005 that sales exceeded year-earlier levels.

"The housing market has decisively turned for the better," said Lawrence Yun, NAR chief economist. "A combination of first-time buyers taking advantage of the [$8,000] housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales."

First-time homebuyers accounted for 30 percent of sales.

"The question mark is how much the first-time homebuyers tax credit is goosing the numbers," said Patrick Newport, U.S. economist for IHS Global Insight. "This credit, which expires November 30, is shifting sales across time. Sales will take a hit once the credit expires."

Homes have become more affordable as their prices have plunged. The national median price for existing homes in July was $178,400. That's $31,700, or 15.1 percent, less than the July 2008 median home price of $210,100.

The NAR said that distressed properties, especially from foreclosures, continued to weigh down median prices. In July, distressed properties accounted for 31 percent of total sales, about the same as their June share but down significantly from earlier levels, which hovered around 50 percent.

Nearly record-low mortgage rates also helped to spur sales. The national average interest rate for a 30-year, conventional, fixed-rate mortgage was 5.22 percent in July, down from 5.42 percent in June and 6.43 percent in July 2008, according to mortgage-financing giant Freddie Mac.

"The housing market is healing as the demand for existing homes steadily marches upward," said Celia Chen, a housing analyst at Moody's Economy.com. "At 5.24 million annualized units, sales are back up to their fall of 2007 pace," she said. "The 15 percent year-over-year decline in the median house price remains deep, but is not accelerating."

Total housing inventory at the end of July jumped 7.3 percent to 4.09 million existing homes available for sale. That represents a 9.4-month supply, the same as June, at the current sales pace.

Existing-home sales last month jumped 13.4 percent in the Northeast, 10.9 percent in the Midwest and 7.1 percent in the South.

Home sales declined 1.7 percent in the West, where the regional unemployment rate reached 10.5 percent in July, according to a Labor Department report released Friday. The jobless rate for California and Oregon hit 11.9 percent last month, while Nevada's jumped to 12.5 percent. The national unemployment rate in July was 9.4 percent.

With more Americans projected to lose their jobs in the future, economists expect home foreclosures to continue to rise.

"As a sign that mortgage performance is once again driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts," Jay Brinkmann, chief economist for the Mortgage Bankers Association, said Thursday. The MBA reported that the percentage of loans in the foreclosure process at the end of the second quarter increased nearly half a percentage point to 4.3 percent.

Rising foreclosures will place more downward pressure on housing prices, making homes more affordable for working families. At the same time, falling prices will place other households "under water," meaning they will owe more on their mortgages than their homes are worth. In a vicious cycle, that would lead to more foreclosures and still-lower prices, analysts fear.