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UPDATE 2-U.S. home sales take a breather, but prices hit 5-year high
July 22, 2013 / 2:55 PM / 4 years ago

UPDATE 2-U.S. home sales take a breather, but prices hit 5-year high

* Home resales fall 1.2 percent in June
    * Median home price highest in five years
    * Supply creeps up, but inventory still low
    * Report shows housing market momentum intact

    By Lucia Mutikani
    WASHINGTON, July 22 (Reuters) - U.S. home resales
unexpectedly fell in June after two straight  months of hefty
increases, but a surge in prices to a five-year high suggested
the housing market recovery remained on course.
    The National Association of Realtors said on Monday home
sales fell 1.2 percent to an annual rate of 5.08 million units.
Still, the sales pace was the second highest for any month since
November 2009.
    While the NAR suggested that a spike in mortgage rates had
contributed to dampening sales last month, economists were
skeptical, noting that the resales mostly reflected contracts
signed in May.
    "The rise in mortgage rates is a headwind, but it's probably
not enough to derail the home sales recovery. The fundamentals
in the market are still very good," said Guy Berger, an
economist at RBS in Stamford, Connecticut.
    Economists polled by Reuters had expected sales to increase
to a 5.25 million unit pace in June. Sales, which were up 15.2
percent from their year-ago level, fell in three regions and
were flat in the Midwest compared with May.
    Mortgage rates have been rising in anticipation of the
Federal Reserve starting to reduce its massive monetary stimulus
later this year. 
    According to Freddie Mac, the 30-year fixed mortgage rate
increased 0.53 percentage point in June to 4.07 percent, its
highest level since October 2011. Still, mortgage rates remain
low and Fed Chairman Ben Bernanke last week expressed optimism
the housing market recovery would continue.
    The recovery, marked by a surge in prices and dwindling
inventories, is helping to shore up the economy by bolstering
household finances and supporting consumer spending.
    Financial markets largely shrugged off the report.    

    Even though sales pulled back last month, there was little
in the home data to suggest an unraveling of the recovery. 
    The median price for a previously owned home soared 13.5
percent from a year ago to $214,200, the highest since June
2008. The inventory of unsold homes on the market rose 1.9
percent from May, pushing the months' supply to 5.2.
    While that was up from May's 5.0 months, it remained below
the 6.0 months that is normally considered as a healthy balance
between supply and demand. Economists say tight supply has
weighed on sales.
    Other details of the report were also encouraging.
Distressed properties - which can depress prices because they
typically sell at deep discounts - accounted for only 15 percent
of sales last month.
    That was the lowest since the Realtors group started
monitoring them in October 2008. These properties, foreclosures
and short sales, had made up 18 percent of sales in May.
    In another sign of underlying strength, properties are
selling more quickly. A home's median time on the market in June
was 37 days. That was down from 41 days in May and 70 days a
year ago, and it was the fewest days since the NAR started
monitoring that number in May 2011. Before the market collapsed
in 2006, it usually took about 90 days to sell a home.
    About 47 percent of all homes sold in June had been on the
market for less than a month.
    "The underlying fundamentals are indicative of a
continuation of the broad-based housing market recovery as
affordability remains near record levels and mortgage rates
remain low from a historical perspective," said Gennadiy
Goldberg, an economist at TD Securities in New York.
    But there were some potential red flags in the report.
    First-time buyers accounted for 29 percent of the
transactions, far below the 40 percent to 45 percent economists
and real estate professionals view as ideal. These buyers are
being sidelined by stringent lending practices and lean
inventory in the low end of the market. 
    Investors, who have been the main drivers of sales, bought
17 percent of the homes in June.
    That was down a touch from 18 percent in May and 19 percent
a year ago. The NAR said it was unclear whether this was just an
anomaly or a sign the sustained increase in home prices was
starting to make investors a bit more cautious.
    Cash sales accounted for 31 percent of transactions in June,
down from 33 percent in May.

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