Existing-home sales rose for a third month in a row in June, and prices may stabilize in many areas by the end of the year if inventories continue to decline, the National Association of Realtors said today.

Sales of resale homes, including single-family homes, townhomes, condominiums and co-ops, rose 3.6 percent from May to June, to a seasonally adjusted annual rate of 4.89 million units — virtually the same as a year ago, NAR said.

At that rate of sales, the 3.82 million homes on the market represented a 9.4-month supply, down from 9.8 months in May.

A six-month supply of homes is generally considered a healthier balance of supply and demand, but the "raw inventory" total, or number of homes on the market, is down 14.9 percent from a year ago.

A Wall Street Journal analysis of housing fundamentals in 28 major real estate markets during the second quarter showed considerable variation in inventory, ranging from a high of 18.1 months in Chicago to just 2.7 months in Sacramento, Calif.

"If we can keep the volume of sales above the level of new inventory, prices could stabilize in many areas around the end of the year,” said NAR Chief Economist Lawrence Yun in a press release.

Distressed properties accounted for 31 percent of sales in June, a factor in the 15.4 percent decline in median home price from a year ago, to $181,800, the group said.

Appraisal issues

Yun repeated past claims by NAR that new rules for appraisals on loans slated for purchase by Fannie Mae and Freddie Mac that took effect May 1 continue to dent sales.

In a survey of the group’s members in June, 37 percent of Realtors claimed to have lost at least one sale because of the new rules, and 70 percent said consumers were paying higher fees, Yun said.

The Home Valuation Code of Conduct was intended to protect appraisers from coercion by lenders to "hit the numbers" and produce appraisals that support a contractual sales price.

But critics say the new rules have shifted work to appraisal management companies, some of which are allegedly relying on inexperienced appraisers who are unfamiliar with the markets they are assigned to work in.

Some appraisers say market forces that continue to push home prices down in many markets are often to blame when appraisals don’t support an agreed-upon sale price, and not the new rules (see story).

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, issued an update Wednesday defending implementation of the code, saying it has not led to lower appraisals or encouraged the use of appraisal management companies.

But NAR, which has called for an 18-month suspension of the code, continues to push for change, saying inexperienced appraisers too often use distressed properties as comparable sales when valuing nondistressed properties without making appropriate adjustments. …CONTINUED

"Clearly the process needs to be revised, but the most logical approach is to use appraisers with local expertise, industry designations and access to local data, who make a physical examination of the property and use apples-to-apples comparisons with nearby home sales,” Yun said.

Freddie Mac issued a bulletin to lenders July 10 stating that appraisers "must be familiar with the local market" where they are valuing properties, choose "appropriate comparable sales," and certify them as the homes "most similar" to the property being appraised.

But the bulletin said appraisers must consider using distressed properties — including short sales, foreclosures or real estate-owned properties — as comparable sales if they are "representative of the properties available to typical purchasers for the market in which the property is located" (see story).

This week, Fannie Mae updated a 10-page "frequently asked questions" (FAQ) on the Home Valuation Code of Conduct, making similar points.

The code "does not speak to foreclosure data," Fannie Mae said in a new section of the FAQ. "It is up to the appraiser to determine if the data is applicable and appropriate or not."

When appraisers sign Fannie Mae’s residential appraisal report form, the FAQ noted in another new section, they are certifying that they "have knowledge and experience in appraising this type of property in this market area."

Freddie Mac also updated its Home Valuation Code of Conduct FAQ this week, noting among other things that the new rules address "the relationship between the lender and the appraiser, not appraisal standards."

Housing breakdown

NAR said single-family home sales rose 2.4 percent from may to June, to a seasonally adjusted annual rate of 4.32 million — about the same pace as a year ago. Median price was down 15 percent from a year ago at $181,600.

Existing condominium and co-op sales grew 14 percent from May to June, to a seasonally adjusted annual rate of 570,000 units, down 3.1 percent from a year ago. The median existing condo price fell 18.9 percent from a year ago, to $183,300.

Regionally, existing-home sales in the Northeast rose 2.5 percent from May to June, to an annual pace of 820,000 in June, down 4.7 percent from a year ago. The median price in the Northeast was $249,400, down 5.9 percent from a year ago.

Existing-home sales in the Midwest increased 0.9 percent from May to June, to 1.1 million a year, down 1.8 percent from a year ago. The median price in the Midwest was down 9.1 percent from a year ago, to $157,000.

In the South, existing-home sales rose 4 percent from May to June, to an annual pace of 1.81 million, down 3.7 percent from a year ago. The median price in the South was $163,200, down 11.9 percent from June 2008.

Existing-home sales in the West were up 6.4 percent from May to June, to an annual rate of 1.16 million, an 11.5 percent increase from a year ago. The median price in the West was $214,800, down 24.9 percent from a year ago.


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