Housing Market Entering Dicey Transition Phase

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RealtyTrac estimated that home
sales in July were at an annualized rate of 4.63 million units, a decrease of 3
percent from June and down 12 percent from July 2013.  This would be the third consecutive month in
which RealtyTrac has projected a decrease in sales volume and the report is sharp
contrast to the Existing Home Sales report issued last week by the National
Association of Realtors® (NAR).  That
report showed existing home sales rose 2.4 percent from June to July, the
fourth straight month-over-month increases, to an annualized total of 5.15
million sales and a rate down only 4.3 percent from the previous July.

 

The RealtyTrac report points to a decreasing share of
distressed sales – bank owned real estate (REO) and short sales – in the
transaction mix.  REO accounted for 8.0
percent of all single-family and condo sales during the month, down from 8.1
percent in June and 9.1 percent in July 2013. 
Short sales accounted for 4.5 percent of all single family and
condo sales in July, up from 3.5 percent in the previous month but down from
5.2 percent a year ago. 

As
the share of distressed sales has shrunk so has the discount that traditionally
accompanies them.  The median price of short
or REO sales was $128,000 in July, up 3 percent from the previous month and up
11 percent from a year ago, but still 37 percent below the median price of
non-distressed sales: $204,000.

The waning influence of distressed sales is contributing
to rising housing prices.  The
median price of U.S. residential properties sold in July – including both
distressed and non-distressed sales – was $191,000, up 3 percent from the
previous month, and up 12 percent from a year ago to the highest level since
September 2008, a 70-month high. 

“As
distressed sales continue to decline, the share of sales is tilting toward more
expensive homes, boosting the nationwide median sales price,” said Daren
Blomquist, vice president of RealtyTrac. “The nationwide home price increase,
however, masks slowing home price appreciation in the majority of housing
markets across the country. This slowing appreciation was expected and provides
another sign that the real estate recovery thus far is behaving rationally.
Still, the housing market is entering a dicey transition phase where it is
becoming much more reliant on first-time homebuyers and move-up buyers to
sustain the recovery as investor involvement wanes.”

Eighteen
of the 183 major markets reached new median home price peaks in the last two
months, including Denver, San Jose, Columbus, Ohio; and Charlotte.  States with the biggest annual increase in
median sales prices were Michigan (+24 percent) and Ohio and Virginia (tied at
+20 percent).  Metros with the biggest
annual increase in median sales price included Detroit (+33 percent), Dayton (+31
percent), and Stockton (+24 percent),

Properties
selling in the $200,000-and-below price range accounted for 49 percent of all
sales in July, down from 52 percent of all sales a year ago, while properties
selling above $200,000 accounted for 51 percent of all sales in July, up from
48 percent of all sales a year ago

Still
the RealtyTrac data concurs with most other analytic sources; the rate of
appreciation is slowing.  Markets where
annual home price appreciation in July 2014 dropped to single digits from
double digits a year ago included San Francisco, San Diego, Los Angeles,
Chicago, Portland, Denver and Phoenix.  Among
metro areas 65 percent (119) saw lower home price appreciation than they did
one year earlier.

 

Despite
national trends, sales of REO and short sales continue as a major influence in
some markets.  In Las Vegas those sales
had a 40.3 percent market share and they made up more than 30 percent of sales
in Stockton and Modesto California and in Lakeland Florida.  Distressed sales increased in some markets as
well, notably New Haven, Louisville, and Boston.

Sales
at foreclosure auctions accounted for 1.2 percent of all single family and
condo sales in July, up from 1.1 percent in June and up from 0.8 percent in
July 2013.   The highest share of these
sales were in Miami, Lakeland, and Orlando, Florida but none rose above a 5
percent market share. 

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