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US home resales' surprise drop snaps streak of gains

Reuters With CNBC.com
Monday, 22 Jul 2013 | 10:00 AM ET
Adam Jeffery | CNBC

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, sales remained the second highest since November 2009.

May's sales pace was revised down to 5.14 million units from the previously reported 5.18 million units. Economists polled by Reuters had expected sales to rise to a 5.25 million unit pace in June.

(Click here to track the U.S. stock market following this economic report.)

Sales were up 15.2 percent from their year-ago level.

The NAR said a spike in mortgage rates, in anticipation of the Federal Reserve starting to reduce its massive monetary stimulus later this year, had probably dampened sales in June.

But economists were skeptical.

"We do not believe that the weaker sales are indicative of a broad-based slowdown in the housing recovery caused by the recent rise in mortgage rates," said Gennadiy Goldberg, an economist at TD Securities in New York.

The 30-year mortgage rate increased 0.53 percentage point to 4.07 percent in June from May, the highest level since October 2011. Still, they 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.

The median price for a previously owned home soared 13.5 percent from a year ago to $214,200, the highest since June 2008. Prices are being boosted by still-lean inventories.

The inventory of unsold homes on the market rose 1.9 percent from May to 2.19 million units. That represented a 5.2 months' supply at June's sales pace.

June existing home sales miss
CNBC's Diana Olick reports that sales of existing homes were down 1.2 percent in June. They had been up 3.4 percent in May. Inventories were up, too, though they were lower year-over-year.

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.

Other details of the report were also encouraging. Distressed properties — which can weigh on 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. The median time on the market for homes was 37 days in June, down from 70 days a year ago.

That was the fewest days on the market 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.

"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 Goldberg.

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