Existing home sales continue to improve

The National Association of Realtors reported a third consecutive monthly increase in existing home sales last month as inventory shrunk and the median price rose.
Home resales rose 3.6 percent in June, from a downwardly revised, seasonally adjusted, annual rate of 4.72 million units to 4.89 million units, the highest level since last October. Distressed properties - foreclosures and short sales - accounting for 31 percent of all sales.

The inventory of unsold homes fell, down from 9.8 months of supply to 9.4 months, however, these levels are still almost double the historical average.

The median sales price rose from $173,000 in May to $181,800 in June, a level that is now 15.4 percent lower on a year-over-year basis.

Lawrence Yun, NAR chief economist noted the following:

The increase in existing-home sales occurred in all major regions of the country. We expect a gradual uptrend in sales to continue due to tax credit incentives and historically high affordability conditions. Despite the rise in closed transactions, many Realtors are reporting lost sales as a result of new appraisal standards that went into effect May 1 of this year.

A full 37 percent of real estate agents surveyed in June said they lost at least one sale in recent months as a result of the stricter property valuation guidelines as defined in the new Home Valuation Code of Conduct.

Yun had these thoughts on the guidelines:

Clearly the process needs to be revised, but the most logical approach is to use appraisers with local expertise, industry designations and access to local data, who make a physical examination of the property and use apples-to-apples comparisons with nearby home sales. In many cases, normal homes are being compared with distressed homes sold at a discount, which often are in subpar condition – this is causing real harm to both buyers and sellers.

While the ratio of distressed sales to total sales has been declining in recent months, that's not necessarily going to continue with the backlog of foreclosures already sitting on banks' books, yet to be listed for sale, and more waves of defaulted properties going back to the bank as Option ARM and Alt-A loans sour with unemployment continuing to rise.

It should be an interesting summer for real estate sales data.