WASHINGTON (July 20, 2011) – Existing-home sales eased in June as contract cancellations spiked unexpectedly, although prices were up slightly, according to the NATIONAL ASSOCIATION OF REALTORS®.

Sales gains in the Midwest and South were offset by declines in the Northeast and West. Single-family home sales were stable while the condo sector weakened.

Total existing-home sales, completed transactions that include single-family, townhomes, condos, and co-ops, declined 0.8% to a seasonally adjusted annual rate of 4.77 million in June from 4.81 million in May. They remain 8.8% below the 5.23 million unit level in June 2010, which was the scheduled closing deadline for the home buyer tax credit.

“Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market, including an unusual spike in contract cancellations in the past month,” says Lawrence Yun, NAR’s chief economist. “The reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16% of REALTORS® report a sales contract was cancelled in June, up from 4% in May, which stands out in contrast with the pattern over the past year.”

Yun cited other factors in the sales performance. “Pending-home sales were down in April but up in May, so we may be seeing some of that mix in closed sales for June,” he says. “However, economic uncertainty and the federal budget debacle may be causing hesitation among some consumers or lenders.”

The pending-home sales index measures home-sale contracts, which typically close within a month or two.

The national median existing-home price for all housing types was $184,300 in June, up 0.8% from June 2010. Distressed homes — foreclosures and short sales generally sold at deep discounts — accounted for 30% of sales in June, compared with 31% in May and 32% in June 2010.

The national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.51% in June, down from 4.64% in May, according to Freddie Mac. The rate was 4.74% in June 2010.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said home sales should be higher. “With record high housing affordability conditions thus far in 2011, we’d expect to see stronger home sales,” he said. “Excessively tight loan standards are keeping many buyers from completing deals. Although proposals being considered in Washington could effectively put more restrictions on lending, some banking executives have hinted that credit may return to more normal, safe standards in the not-too-distant future, but the tardiness of this process is holding back the recovery.”

Phipps added that lower mortgage loan limits, due to go into effect on October 1, already are having an impact. “Some lenders are placing lower loan limits on current contracts, anticipating they may not close before the end of September. So, some contracts may be getting cancelled because certain buyers are unwilling or unable to obtain a more costly jumbo mortgage,” he said.

Total housing inventory at the end of June rose 3.3% to 3.77 million existing homes available for sale, which represents a 9.5-month supply at the current sales pace, up from a 9.1-month supply in May.

First-time buyers purchased 31% of homes in May, down from 36% in May; they were 43% in June 2010 when the tax credit was in place. Investors accounted for 19% of purchase activity in June, unchanged from May; they were 13% in June 2010.

The balance of sales was to repeat buyers, which were a 50% market share in June, up from 45% in May, which appears to be a normal seasonal gain.

Single-family home sales were unchanged at a seasonally adjusted annual rate of 4.24 million in June, but are 7.4% below a 4.58 million pace in June 2010. The median existing single-family home price was $184,600 in June, up 0.6% from a year ago.

Existing condo and co-op sales fell 7.0% to a seasonally adjusted annual rate of 530,000 in June from 570,000 in May, and are 18.0% below the 646,000-unit level a year ago. The median existing condo price was $182,300 in June, up 1.8% from June 2010.

Source: NAR