WASHINGTON – People are buying homes at the weakest pace in 14 years.
Sales of previously occupied homes fell in June for a third straight month to a seasonally adjusted annual rate of 4.77 million, the National Association of Realtors said Wednesday.
This year's pace is lagging behind the 4.91 million homes sold last year — the fewest since 1997. In a healthy economy, people buy roughly 6 million homes per year.
Fewer first-time homebuyers are entering the market. Many can't obtain a loan or meet larger down payment requirements.
Another problem is that a growing number of contracts are being canceled before sales are finalized, many because of lower appraisals that are scuttling loans. And the slowdown in hiring is making people think twice about taking on extra debt.
High unemployment, millions of foreclosures and tighter credit are likely to keep people from buying homes in the second half of the year, economists say. Even low home prices and cheap mortgage rates are unlikely to draw buyers to the market.
"Given the state of the job market, and some reluctance among banks to lend and households to borrow, this lackluster pace of sales is not too surprising," said Alistair Bentley, economist at TD Economics.
First-time homebuyers, who are critical to a strong and stable housing markets, have shrunk to 31 percent of sales. That's the fewest since January 2010.
Normally, first-time buyers make up about half of all home sales. And their purchases of low and moderately priced homes allow sellers to move up to pricier homes.
But the sluggishness of the U.S. economy appears to be weighing heavily on the minds' of would-be homebuyers, analysts say. In June, the economy created 18,000 net jobs, the fewest in nine months. The unemployment rate rose to 9.2 percent.
Home sales have fallen in four of the past five years, forcing prices down in most markets. Declining home values have made people feel less wealthy, and as a result they are spending less. Consumer spending accounts for 70 percent of economic activity.
"What would change things for the better would be more-normal hiring, and the creation of incomes and spending that would result," said Pierre Ellis, an analyst at Decision Economics.
Some sales are falling apart at the last minute. Roughly 16 percent of home deals were canceled last month. That's four times the number in May and the highest level since such records began being kept more than a year ago. A sale isn't final until a mortgage is closed.
Buyers have canceled purchases after appraisals showed that the homes were worth less than the buyers' initial bids. Millions of foreclosures have made it harder to get accurate appraisals that all parties can agree on.
Foreclosures and short sales — when a lender agrees to sell for less than what is owed on a mortgage — made up about 30 percent of all home sales last month, up from about 10 percent in past years. And a wave of foreclosures are being held up, either by backlogged courts or lenders awaiting state and federal probes into troubled foreclosure practices.
Investors have targeted foreclosures and other deeply discounted properties. They accounted for 19 percent of sales in June.
The median sales price rose in June to $184,300, according to the Realtors' group. It was mainly because of an annual post-spring bump that drove prices higher in the Northeast and West.
Sales were uneven across the country. In May, sales rose 0.5 percent in the West and 1 percent in the Midwest and fell 1.7 percent in the South and 5.2 percent in the Northeast.
The glut of unsold homes rose slightly in June to 3.77 million homes. At last month's sales pace, it would take 9.5 months to clear those homes. Analysts say a healthy supply can be cleared in six months.
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