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July 23, 2010 / Volume 2 / Number 24
Existing-Home Sales Slow in June 2010 but Remain Above Year-Ago Levels
With the scheduled closing deadline for the home buyer tax credits, existing-home sales slowed in June 2010 but remained at relatively elevated levels, according to the National Association of Realtors.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 5.1% to a seasonally adjusted annual rate of 5.37 million units in June from 5.66 million in May, but are 9.8% higher than the 4.89 million-unit pace in June 2009.
Lawrence Yun, NAR chief economist, said the market shows uncharacteristic yet understandable swings as buyers responded to the tax credits. “June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months,” he said.
“Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge. Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.74% in June from 4.89% in May; the rate was 5.42% in June 2009.
The national median existing-home price for all housing types was $183,700 in June, which is 1.0% higher than a year ago. Distressed homes were at 32% of sales last month, compared with 31% in May; it was also 31% in June 2009.
NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said softer home sales expected this summer don’t tell the whole story. “Despite these market swings, total annual home sales are rising above 2009 and we’re looking for overall gains again this year as well as in 2011,” she said. “Conditions have become more balanced in much of the country, which is good for both buyers and sellers. However, consumers find it even more challenging to navigate the transaction process, especially for distressed properties, which only underscores the value Realtors bring to buyers and sellers in this market.”
A parallel NAR practitioner survey shows first-time buyers purchased 43% of homes in June, down from 46% in May. Investors accounted for 13% of sales in June, little changed from 14% in May; the remaining purchases were by repeat buyers. All-cash sales were at 24% in June compared with 25% in May.
Total housing inventory at the end of June rose 2.5% to 3.99 million existing homes available for sale, which represents an 8.9-month supply at the current sales pace, up from an 8.3-month supply in May.
“The supply of homes on the market is higher than we’d like to see. But home prices are still holding their ground because prices had already overcorrected in many local markets,” Yun said. Raw unsold inventory remains 12.7% below the record of 4.58 million in July 2008.
Single-family home sales fell 5.6% to a seasonally adjusted annual rate of 4.70 million in June from a level of 4.98 million in May, but are 8.5% above the 4.33 million pace in June 2009. The median existing single-family home price was $184,200 in June, up 1.3% from a year ago.
Single-family median existing-home prices were higher in 10 out of 19 metropolitan statistical areas reported in June in comparison with June 2009. In addition, existing single-family home sales rose in 12 of the 19 areas from a year ago while two were unchanged.
Existing condominium and co-op sales slipped 1.5% to a seasonally adjusted annual rate of 670,000 in June from 680,000 in May, but are 20.5% higher than the 556,000-unit pace in June 2009. The median existing condo price was $180,100 in June, which is 1.4% below a year ago.
Regionally, existing-home sales in the Northeast rose 7.9% to an annual level of 960,000 in June and are 17.1% above June 2009. The median price in the Northeast was $244,300, down 1.2% from a year ago.
Existing-home sales in the Midwest dropped 7.5% in June to a pace of 1.23 million but are 11.8% higher than a year ago. The median price in the Midwest was $155,900, down 0.1% from June 2009.
In the South, existing-home sales fell 6.5% to an annual level of 2.01 million in June but are 11.0% above June 2009. The median price in the South was $163,600, unchanged from a year ago.
Existing-home sales in the West dropped 9.3% to an annual pace of 1.17 million in June but are 0.9% higher than a year ago. The median price in the West was $221,800, up 1.5% from June 2009.
For more information, visit www.realtor.org / Printed by permission of RISMEDIA. July 23, 2010.
President Obama Signs Historic Financial Reform into Law
With a broad smile and the stroke of a pen, President Barack Obama capped a contentious 18-month struggle and signed into law the broadest revamp of financial regulation since the Great Depression.
“Passing this bill was no easy task. To get there, we had to overcome the furious lobbying of an array of powerful interest groups and a partisan minority determined to block change,” Obama said in a pre-signing speech, surrounded by cheering congressional leaders and administration members.
Alternating between hitting Wall Street and acknowledging its economic importance, the president said that the historic Restoring American Financial Stability Act of 2010 seeks to strike a balance that would protect consumers while allowing the vital financial sector to prosper.
“The fact is the financial industry is central to our nation’s ability to grow, to prosper, to compete and to innovate. This reform will foster innovation, not hamper it. It is designed to make sure everybody follows the same set of rules,” he said. “Unless your business model depends on cutting corners or bilking customers, you’ve got nothing to fear from reform.”
The signing marked the third major legislative accomplishment for Obama, after an $800 billion stimulus and tax-cut package and a regulatory revamp of the health care sector. Still, the president has slumped in the opinion polls, dragged down by a sluggish economy. Polls also suggest that the broader public is ambivalent about the new measure.
To combat that, Obama and congressional Democrats went to extremes to highlight all the consumer provisions in the legislation. There are numerous measures to combat predatory lending, and the president invited borrower Robin Fox of Rome, Ga., to the speech. She’d been hit with unexpected interest rate increases on a credit card balance. “With this law, unfair rate hikes, like the one that hit Robin, will end for good,” Obama said.
Underscoring the historic nature of the legislation, which updates many rules that date to the 1930s, the televised signing ceremony wasn’t at the White House but at the Ronald Reagan Building, in a large auditorium where about 400 invited guests could bask in the accomplishment.
The legislation seeks to fix much of what went wrong in the lead-up to the nation’s deep financial crisis. It gives regulators the power to dissolve large, interconnected financial institutions and allows the Federal Reserve to break up companies that it thinks are so large that their failure would pose a risk to the U.S. and global economy.
The lack of this authority forced the Bush administration and a Democratic-led Congress to choose unpopular bank bailouts over a disruptive bankruptcy process that Fed Chairman Ben Bernanke warned could have led to a global economic depression.
“The bill isn’t perfect, since it represents what was politically achievable in an election year. But it sets some important starting points for more detailed work in areas where oversight has been lacking, such as viewing risk from a systemic point of view and increased consumer protection,” said Scott McCleskey, the author of the new book When Free Markets Fail, which seeks to explain the crisis in layman’s terms. “In the end, though, the crisis made abundantly clear the fact that we need more regulation because the markets have become too complex to regulate themselves.”
For ordinary Americans, the legislation will be felt most directly through the creation of a new and independent Bureau of Consumer Financial Protection. It will police credit extended to consumers, be it mortgages, credit cards, student loans, auto loans or even payday loans.
“For the first time, families will have a tough, independent cop in Washington to help clear out the tricks and traps hidden in consumer credit agreements,” Elizabeth Warren, a Harvard University professor who’s credited with developing the idea of the bureau, said in a statement.
Gail Hillebrand, a senior attorney for the advocacy group Consumers Union, added that “millions of Americans have been hit by shady loans, hidden fees and surprise rate increases, and this Consumer Financial Protection Bureau will take dead aim at these kinds of problems.”
Business groups frowned on the new law. “This legislation, while drafted with the best intentions, paints the U.S. business community with a broad brush and will have many unintended consequences for the more than 12,000 nonfinancial publicly traded companies,” Larry Burton, the executive director of the Business Roundtable, said in a statement.
The U.S. Chamber of Commerce, which aggressively lobbied against the legislation, didn’t pull punches in its statement upon signing. “Such a broad, sweeping bill epitomizes a law with unintended consequences that creates more uncertainty for American businesses,” said Thomas J. Donohue, the chamber’s president and CEO. “For years the chamber has called for reform that modernizes our financial system. Yet this law is like adding new paint on an old car; it’s still not going to run at the pace and with the agility that is currently demanded.”
Regulators will sit together on a special council to collectively study risks to the broader financial system. They’ll be empowered to order that banks keep more capital on hand to guard against future losses, and they’ll have knowledge that they didn’t have before about the complex financial instruments called over-the-counter derivatives. The size of the market for these private bets between parties is valued in the trillions of dollars, yet these deals largely have been hidden from regulators.
Now, most trading in these complex instruments will be done on public exchanges or clearinghouses, and regulators will have the authority to limit a financial player’s overall holdings in contracts for oil, natural gas, wheat or other commodities if it appears that anyone is seizing so much of the market that prices could be manipulated.
“It gives us the transparency, tools and teeth we need to better regulate the markets we already oversee and to bring light to the more than $600 trillion over-the-counter markets which are currently unregulated,” said Bart Chilton, a commissioner on the Commodity Futures Trading Commission (CFTC). “Many key items will be decided in the near future: How do we actually oversee and regulate the OTC markets? How do we implement position limits? And how are we going to use some of these new professional-grade regulatory tools to police these markets? For example, CFTC has had only one successful manipulation prosecution in 35 years. The law was broken but the bill gives us new authority to go after disruptive trading practices.”
By Kevin G. Hall / (c) 2010, McClatchy-Tribune Information Services. / Visit the McClatchy Washington Bureau on the World Wide Web at www.mcclatchydc.com. / Printed by permission of RISMEDIA. July 23, 2010.
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