August 23, 2011 (Shirley Allen)
Prices and sales of existing homes declined in the second quarter of 2011 compared to the same period last year reflecting the effects of what last years home buyers tax credit and the current level of distressed property sales have had on the housing market according to the National Association of Realtors (NAR).
Demand for housing surged in the second quarter of last year as the home buyer’s tax credit came to a close in June 2010. Although compared to historical standards the normal seasonal trend this year has been below statistical norms, comparing this years housing data to last years makes the current quarterly data look all the more dismal.
Sales of existing homes in the second quarter of 2011 declined 12.7 percent to a seasonally adjusted rate of 4.86 million from 5.57 million in the second quarter of 2010. Monthly sales declined every month in the quarter and were down 5.4 percent from the first quarter of 2011.
The median price for existing homes declined in 109 out of the 151 metropolitan statistical areas (MSAs) during the second quarter of this year with 41 of the areas posting a price increase and one unchanged compared to the second quarter of 2010.
The national median price for an existing home was $171,900 in the second quarter which was down from $176,800 in the second quarter of 2010. Lawrence Yun, chief economist of NAR, believes the narrow range of price fluctuations is a sign of stabilization.
“Median home prices have been moving up and down in a relatively narrow range in many markets, which shows a stabilization trend,” he said.
Distressed properties also continue to make an impact on the housing market with 33 percent of all second quarter sales being distressed properties. The influence of these properties on home prices is huge as distressed properties typically sale at a discount of about 20 percent.
Yun said, “The level of foreclosures, which can artificially depress median prices, can vary notably in given markets. The annual price gauge smoothes out the quarterly swings and has shown fairly stable price trends in most markets.”
Cash purchasers made up 30 percent of the buyers in the second quarter, up from 25 percent in the second quarter of 2010.
The number of first time home buyers declined as expected with the expiration of the tax credit. First-time buyers made up 35 percent of the homes purchased in the second quarter compared to 46 percent in the same quarter last year.
Regionally, existing home sales declined in all four regions in the second quarter compared to the same period last year with sales declining 19.9 percent in the Northeast, 18.3 percent in the Midwest, 9.9 percent in the South, and 6.2 percent in the West. Sales in all four regions were also down compared to the first quarter of 2011.
The median home price fell in three of the four regions with the Midwest posting a 5.4 percent decline, the South posting a 2.7 percent decline, and the West posting a 3.1 percent decline. The Northeast was the only region that saw a gain in prices year-over-year, posting an increase of 2.0 percent.