June existing home sales fall; SFH sales at l…

It’s existing home sales day, with the latest numbers recently released by the National Association of Realtors.Here’s what the June data showed …

* Sales fell 2.6% to a seasonally adjusted annual rate of 4.86 million in June from 4.99 million in May. That wasslightly worse than the average forecast of 4.94 million home sales. Sales were down 15.5% from the year-earlierreading of 5.75 million. This is the lowest rate on record for all existing home sales. Single-family only sales, at4.27 million, were the lowest since January 1998 (shown in the chart above).

* The supply of homes for sale climbed inched up to 4.49 million units in June from 4.482 million in May (previouslyreported as 4.485 million). They were up from 4.368 million a year earlier. On a months supply at current sales pacebasis, inventory climbed to 11.1 months from 10.8 months in May. That was also up from 9.1 a year earlier, but ever soslightly below the cycle peak of 11.2 months in April.

The single-family only supply reading was 11 months, up from 10.5 in May. That’s the highest going all the way back toJune 1985 (11.4 months).

* Median home prices rose 3.5% to $215,100 in June from $207,900 in May (previously reported as $208,600). They fell6.1% from $229,000 a year earlier.

June was another weak month for the existing home market, with sales of single-family homes falling to the lowest levelin more than a decade and the supply of homes on the market hovering near mutli-year highs. The list of reasons for theweakness is long: Consumer confidence is down. Unemployment is up. Mortgages are harder to get now that lenders havefound religion. And the broader economy has been decelerating. We’re also seeing long-term mortgage rates climbprecipitously. At 6.63%, 30-year fixed loan rates are within a whisker of their multi-year high (6.8%, set in July2006).

That’s the bad news. On the flip side, Congress is passing a significant package of reforms and bailout programsdesigned to support the housing market. President Bushwill sign this into law within days. Some of its provisions, such as the FHA refinance program, are designed to keepmore stressed borrowers in their homes, reducing the supply of foreclosures coming to market. Others, like the taxcredit for new home buyers, are targeted at the demand side of the equation. And ofcourse, raising the loan limits permanently will allow Fannie Mae, Freddie Mac, and the FHA to back more loans inhigher cost areas. This should bring some relief to formerly jumbo buyers who have been paying much higher rates to getloans.

But like other reform packages before it, this one can only soothe the pain for some buyers and borrowers, not cure thedisease. Only lower prices, less construction activity, and the passage of time can fix the underlying imbalancebetween housing supply and housing demand.

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