Joe Moshe, Broker/Owner, Charles Rutenberg Realty, says that the decline in existing home sales in June could be attributed to higher unemployment and worries about the federal debt. He added that the more stringent lending requirements will only weaken an already crippling housing market as lenders are asking for higher down payments from prospective buyers. However, he foresees the housing market improve in the coming months, with the boom in new home construction the same month.
The National Association of REALTORS reported today that existing home sales in June fell slightly by 0.8% from the previous month. The NAR reported a seasonally adjusted rate of 4.77 million units in June, compared to May's figure of 4.81 million units. This signifies the third straight month of declines. Last month's figure was 8.8% lower than the June 2010 pace of 5.23 million units. (Existing-home sales are completed transactions that include single-family homes, townhouses, condominiums and co-ops.)
The unemployment results - an indicator on how the housing market will fare - during the month of May resulted in a lack of consumer confidence. The Labor Department reported that the unemployment rate went up from 9.1% in May to 9.2% last month as employers only added 18,000 jobs to their payrolls.
Also, 16% of NAR members reported sales contracts being cancelled in June, up from 4% in May. First-time homebuyers purchased 31% of existing homes last month, down from 36% in May. "The high unemployment numbers, weak hiring in the job market, and worries about the federal debt may have resulted in may contract cancellations," Mr. Moshe said. "As a result, these existing homes are still going to be on the market for a while."
The national median existing home sale price was $184,300 in June, up 0.8% from June 2010, according to the NAR. Interest rates also fell, with a 30-year fixed rate at 4.51% in June, down from 4.64% the previous month, according to Freddie Mac. Despite the current affordability of these units, Mr. Moshe says the pending federal regulations could affect new borrowers.
"If borrowers are now required to place a 20% down payment on a new home, they might not be able to come up with the money, especially during a tough economy," he said. "The tighter credit and lending requirements will only serve as a disincentive to prospective homeowners and do further damage to the Real Estate market."
Mr. Moshe says that existing home sales may be a more present indicator of the housing market, the increase in home construction in June may result in a more positive showing in the future, although new home construction is a lagging indicator. According to the Commerce Department, builders began work on a seasonally adjusted 629,000 homes last month, up 14.6% from May.
Most of the new construction is comprised of apartments, which jumped 31.8%. "This significant increase in new apartment construction is the result of a growing demand for rentals because many who wish to buy a home cannot afford to put 20% down," Mr. Moshe said.
Single-family home construction rose 9.4%, its biggest increase since June 2009. Commerce also said that building permits - a gauge of future construction - was up 2.5%. Overall, June was the best showing in five months.
"Builders are feeling more confident about the economy and have resumed construction of new residential units, but the positive effects on the housing market will not be felt immediately," Mr. Moshe said. "Although more building permits were issued last month over the previous month, it could be a while until the house is completed, placed on the market and sold. The housing market will not improve overnight."
Charles Rutenberg Realty is one of the nation's fastest-growing Agencies with more than 1,300 Agents on Long Island, Queens and Westchester. For more information, call (516) 575-7500, or visit www.crrli.com.
About Charles Rutenberg Realty
Founded in 2006, Charles Rutenberg Realty of New York is one of the nation's fastest-growing, most progressive Real Estate Agencies with over 1,300 Agents on Long Island, Queens and Westchester. Charles Rutenberg Realty specializes in residential properties in Nassau, Suffolk, Queens, Kings and Westchester Counties. Among the 1,900 independent Real Estate offices represented by Multiple Listing Services (MLS), Charles Rutenberg Realty has the highest market share for available inventory, listings taken for the first six months of the year and listings under contract. Its Agents are trained in the latest creative marketing programs and can fulfill all their clients' financial and personal needs when buying or selling a home. Charles Rutenberg Realty is headquartered in Plainview, New York, with offices in New York City, Florida and Illinois. For more information, call (516) 575-7500 or visit www.crrli.com.