Home Sales on Pace for Worst Year Since Housing Bust
Home sales fell 0.8 percent last month to a seasonally adjusted annual rate of 4.77 million homes, the National Association of Realtors said Wednesday. That's far below the 6 million homes per year that economists say represents a healthy housing market.
Through the first six months of this year, the sales pace is behind last year's 4.91 million homes sold -- the weakest sales in 13 years. Sales have fallen in four of the past five years.
The Realtors' group said a record number of people who signed contracts canceled deals last month. And first-time buyers fell to a smaller share of the market.
Declining home prices have kept many people from selling their houses and taking new jobs in growing areas. They have also made people feel less wealthy and that has reduced the consumer spending that drives about 70 percent of economic activity.
Roughly 16 percent of home deals were canceled last month, the highest level since such records began being kept more than a year ago. It was unclear what the chief reason was for the high rate. But some buyers have canceled purchases after appraisals showed that the homes were worth less than the buyers' initial bids. A sale isn't final until a mortgage is closed.
First-time homebuyers made up just 31 percent of sales. They normally make up about half of all home sales. First-time buyers are critical to a strong and stable housing market. They tend to keep their homes for years. What's more, their purchases of low and moderately priced homes allow sellers to move up to pricier homes.
Bigger down payments, tougher lending rules, high debt and a shortage of desirable starter homes are keeping many would-be buyers away. Even some with good credit and enough money for a down payment are holding off because they are worried that home prices will keep falling.
Foreclosures and short sales -- when a lender agrees to sell for less than what is owed on a mortgage -- make up an increasingly large portion of all home sales. And a wave of foreclosures are being held up, either by backlogged courts or lenders awaiting state and federal probes into troubled foreclosure practices.
Re-sold homes are a bargain compared to new homes. The median price of a new home is more than 30 percent higher than the median price for a previously occupied home. That's twice the normal markup.
A glut of millions of unsold homes is also weighing on prices, forcing sellers to slash their prices in order to grab the attention of potential buyers.
Most economists say home prices will keep falling, by at least 5 percent, through the rest of the year. Many forecasts don't anticipate a rebound in prices until at least 2013.
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