Home/Mortgages/Existing Home Sales Up, Contract Failures Still High

January 23, 2012 (Chris Moore)

Completed transactions of existing home purchases increased for the third consecutive month despite yet another month in which a large amount of Realtors® reported losing a sale due to a contract failure according to the National Association of Realtors® (NAR).

Existing home sales, which include single-family homes, townhomes, condos, and co-ops, increased 5.0 percent to a seasonally adjusted rate of 4.61 million in December, up from a revised 4.39 million in November. Sales were 3.6 percent higher than the seasonally adjusted 4.45 million completed transactions in December 2010.

For the third consecutive month, nearly one out of three Realtors® reported losing a sale due to a contract failure. NAR first reported the spike in cancelled contracts in October when 33 percent of its members reported losing a sale caused by a contract failure, a huge jump from 18 percent in September. Contract failures first spiked in June, climbing from four percent in May to 16 percent in June and remained around that level until October.

Most contract failures are caused by declined mortgage applications or low appraisals but can also be caused by home inspection problems and employment losses.

Lawrence Yun, chief economist of NAR, stated, “The pattern of home sales in recent months demonstrates a market in recovery. Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”

Regional Home Sales:

Existing home sales in the Northeast increased 10.7 percent from November to December to an annual rate of 620,000 sales and were 3.3 percent higher than in December of last year, while in the Midwest, sales were 8.3 percent higher than the previous month, increasing to a rate of 1.04 million annual sales, and were 9.5 percent higher than last year’s sales pace.

In the South, existing home sales rose 2.9 percent in December at an annual pace of 1.76 million sales and were 3.5 percent above December 2010 levels, and in the West, sales for the month increased 2.6 percent to an annual rate of 1.19 million sales and were 0.8 percent below last year’s sales pace.

Home Prices:

Home prices showed modest improvement as the national median existing home price increased from $164,200 in November to $164,500 in December. The median home price in December was still 2.5 percent lower than a year ago.

The median price in the Northeast was $231,300, which was 2.7 percent lower than a year ago, while the median price in the Midwest was $129,100, down 7.9 percent from December 2010.

In the South, the median price was $146,900, a decline of 1.1 percent from a year ago and in the West the median price was $205,200, up 8.4 percent from December of 2010.

Cash and Distressed Property Sales:

Distressed property sales accounted for 32 percent of all existing home sales in December, up from 29 percent in November but down from 36 percent in December of 2010. Foreclosure sales made up 19 percent of all existing home sales while short sales accounted for 13 percent of all existing sales.

Cash sales accounted for 31 percent of all sales in December, up from 28 percent in November, while investors jumped in and purchased 21 percent of the homes sold in December, up from 19 percent in November.

Housing Inventory:

The number of homes available for sale in December continued to dwindle as housing inventories slipped 9.2 percent to 2.38 million homes which represents a 6.2 month supply, down from a 7.2 month supply in November.

Tags: existing home sales, investors, distressed property sales, declining prices, low appraisals, cancelled contracts, median home price, contract failures, purchase cancellations