Sales of previously owned U.S. homes unexpectedly declined in June to a seven-month low as the industry struggled to overcome rising unemployment and foreclosures.
Purchases dropped 0.8 percent to a 4.77 million pace, data from the National Association of Realtors showed today in Washington. The median projection in a Bloomberg News survey called for a gain to 4.9 million. Inventories increased, more contracts were canceled and 30 percent of transactions last month were of distressed dwellings, the figures showed.
Stricter lending rules, unemployment above 9 percent and delays in processing foreclosures mean it may take years to reduce the number of distressed properties on the market even as all-cash purchases have recently helped buoy demand. Federal Reserve Chairman Ben S. Bernanke last week said the decline in confidence and lack of job growth that are impeding consumer spending are also keeping real estate “depressed.”
“The market continues bumping along the bottom, with every move ahead matched by a disappointing setback,” said Richard DeKaser, an economist at Parthenon Group in Boston. “As long as the risk of further price declines is appreciable, buyers and lenders alike are going to remain skittish. For there to be a meaningful rebound in sales, we’ll probably have to wait until 2012.”
Stocks fell on concern the government will fail to increase the debt limit. The Standard & Poor’s 500 Index dropped 0.1 percent to 1,325.84 at the 4 p.m. close in New York, up 0.1 percent. Treasury securities declined, sending the yield on the benchmark 10-year note to 2.94 percent from 2.88 percent late yesterday.
Estimates for home sales in the Bloomberg survey of 71 economists ranged from 4.75 million to 5.2 million.
Existing-home sales have fallen since reaching an annual peak of 7.08 million in 2005, before the housing boom turned into a subprime-mortgage bust that helped dragged the U.S. into an 18-month recession. They slumped to a 13-year low of 4.91 million last year.
Of all purchases, cash transactions accounted for about 29 percent, NAR chief economist Lawrence Yun said in a news conference today as the figures were released. The Realtors group began tracking the monthly figure in August 2008, and the share on a yearly basis before that was around 10 percent, Yun has said.
The number of canceled contracts to buy previously owned homes jumped to 16 percent in June from 4 percent a month earlier. Yun said the rise was a “mystery” that the group will look into by surveying Realtors around the country. They have been running in the 9 percent to 10 percent range in the past year.
Distressed sales, which comprise foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for about the same share of the total in June as in recent months.
The U.S. Treasury Department is exploring a proposal aimed at promoting modifications of delinquent or defaulted home loans, including writedowns of principal, by bringing fresh private capital into the market, according to housing market executives.
The plan is based on a paper whose main author is Jordan Dorchuck, executive vice president of American Home Mortgage Servicing Inc. in Coppell, Texas. Dorchuck said he’s contacted other loan servicers at the behest of the Treasury Department to gauge their interest in the proposal and generally they think it could have some value.
Today’s report showed existing-home sales decreased in two of four regions, led by a 5.2 percent drop in the Northeast and a 1.7 percent decline in the West.
The median sales price rose 0.8 percent last month from June 2010 to $184,300.
The inventory of unsold previously owned homes on the market rose to 3.77 million in June from 3.65 million in May. At the current sales pace, it would take 9.5 months to sell those houses, the longest since November, compared with 9.1 months at the end of May. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.
A total of 6.35 million homeowners weren’t current on their loans at the end of May, with 2.16 million in the process of foreclosure, according to data from Lender Processing Services Inc., a Jacksonville, Florida-based provider of mortgage-processing services and data. Foreclosures averaged 580 days after borrowers became delinquent on their loans.
Lender delays in processing home-loan defaults will push as many as 1 million U.S. foreclosure filings from this year into 2012 or beyond, casting an “ominous shadow” on the housing market, RealtyTrac Inc., a housing data provider, said last week. A clogged foreclosure pipeline means it will take longer to clear the inventory of unsold homes and may prevent prices from finding a bottom.
Builders remain cautious about the outlook, prompting them to look for other income sources. Miami-based Lennar Corp., the third-largest U.S. homebuilder by revenue, last month reported second-quarter profits that beat analysts’ estimates on rising earnings at its distressed-investing unit.
“The long-awaited selling season of 2011 has not yet defined itself as the beginning of a recovery cycle,” Stuart Miller, chief executive officer of Lennar, said on a June 23 teleconference. “The housing recovery will take time and patience and will be inconsistent and uneven.”