July home sales slower, but still record-setting

Sales of existing single-family homes decreased during July, but continued on pace to shatter the record annual total recorded in 1998, according to an Aug. 25 release from the National Association of Realtors.

Compared to the previous month, the seasonally adjusted annual rate1 of exist-ing home sales dropped by 3.9 percent in July to a level of 5.41 million units.

Despite this decrease, the monthly sales pace was the third highest ever recorded, topped only by seasonally adjusted levels posted in March and June of this year.

Compared to July of 1998, existing home sales increased by 4.6 percent last month.

NAR President Sharon A. Millett said the industry should realize that when monthly sales records are being set, a brief dip in sales likely represents a normal fluctuation, not a genuine market decline.

"Keeping everything in perspective, I think the important thing to note is that our industry remains on pace to top last year's record for sales by a wide margin," Millett said.

"Most of the conditions one looks for to create a healthy market remain in place, which suggests we will experience continued strong levels of home sales," she added.

The real estate industry sold record levels of existing homes in both 1997 and 1998. However, the annualized pace of home sales posted in July represents a more than 8 percent increase over last year's record annual total of 4.97 million existing home sales.

According to Dr. James F. Smith, NAR's chief economist, the small decline in existing single-family home sales in July may be attributable in part to the recent increase in interest rates.

"Overall conditions are still excellent for home buyers, but the recent upswing in interest rates may have discouraged some from buying," he said. "But the national economy remains strong and I expect our industry will continue to enjoy a record year during the second half of 1999," Smith added.

According to Freddie Mac, the monthly average commitment rate for a 30-year, fixed-rate mortgage in July was 7.63 percent.

The average interest rate rose from 7.55 percent in June and from 6.95 percent in July of 1998.

The national existing home sales price in July was $135,400, an increase of 2.7 percent compared to one year earlier.

Over the 12-month span, existing home prices have increased in three of the four regions of the United States, declining only by 1 percent in the western area of the country.

One factor that reflects the incredible strength of the home sales market,according to Smith, is the continued decline in inventory.

There were 1.91 million existing homes for sale at the end of July, representing a 4.4-month supply at the current sales pace.

The aggregate inventory decreased by 7.3 percent in raw numbers compared to June, and fell by 10.2 percent in terms of the month's supply of homes for sale over the same period.

"This is the second-consecutive month in which we've reached the lowest amount of homes available for sale since December of 1994, when there was a 4.1 month supply of existing homes," Smith said.

The National Association of Realtors, "The Voice for Real Estate," is the nation's largest professional association, representing nearly 730,000 members involved in all aspects of the real estate industry.

1 The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months.

Seasonally adjusted rates are used in reporting monthly data to factor out seasonal variations in real estate resale activity.

For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather.

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