Home Sales Are Up, but So Are Inventories

The supply of unsold properties is now at record levels.

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While existing-home sales increased 3.1 percent in July from the previous month, the backlog of unsold properties increased to record levels, the National Association of Realtors said Monday in a report.

From NAR:

Existing-home sales—including single-family, townhomes, condominiums and co-ops—increased 3.1 percent to a seasonally adjusted annual rate of 5.00 million units in July from a downwardly revised level of 4.85 million in June, but are 13.2 percent lower than the 5.76 million-unit pace in July 200....

The national median existing-home price for all housing types was $212,400 in July, down 7.1 percent from a year ago, when the median was $228,600....

Total housing inventory at the end of July rose 3.9 percent to 4.67 million existing homes available for sale, which represents an 11.2-month supply at the current sales pace, up from an 11.1-month supply in June. The rise in supply results from a sharp increase in condo inventory; the single-family supply declined.

Here's Global Insight's chief U.S. financial economist Brian Bethune's take on the report:

Sales rebounds in the Northeast and West were driven primarily by improving valuations, which was the primary factor driving better affordability. Housing valuations in the Northeast were down on a yearly basis in the vicinity of 3% to 5%, while valuations in the West were down by 17% to 22%.

While the bounce in July existing sales is a welcome improvement, the housing market still suffers from high inventories. Moreover, the recent upward pressure on retail mortgage rates due to pressures on GSE borrowing rates—and further weakening in the employment market—threatens to delay the expected housing market recovery.

Another key point on the data, from Bloomberg:

One-third to 40 percent of total sales last month reflected distressed properties, which include foreclosures, [ Lawrence Yun, the chief economist of NAR] said.