Existing home sales, which include single-family homes, townhomes, condominiums, and co-ops, were down 3.5 percent from June to July; however, the July sales are a 21 percent boost from the July 2010 totals, though the number may reflect more the unusual market conditions of the 2010 home buyer tax credit than the current market (Houston, for example, has seen similar housing data for July).
The main takeaway from the housing data, though, was contract failures, which were reported by 16 percent of NAR members. Contract failures are cancellations that arise from declined mortgage applications or failed loan underwrites because of lower-than-expected appraisal values. Additionally, 9 percent of members reported delayed contacts because of low appraisals, and another 13 percent said that their contracts were renegotiated to lower prices because appraisals were below the initially agreed price.
Lawrence Yun, the NAR chief economist, said the data reflects the tight financing options that complicate housing’s recovery.
“Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers,” Yun said. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs.”
Ron Phipps, the president of the NAR and the president of Phipps Realty in Warwick, R.I., was similarly frustrated with the appraisal data.
“For both mortgage credit and home appraisals, there’s been a parallel pendulum swing from very loose standards which led to the housing boom, to unnecessarily restrictive practices as an overreaction to the housing correction,” Phipps said. “To a great extent, banks are exerting influence on appraised valuations with negative impacts for both home sales and prices.”
The tight financing is made all the more difficult in the face of historically low interest rates. Just yesterday, Freddie Mac announced that its 30-year Fixed Mortgage Rate is now at an all-time low.