June existing home sales drop sharply

The housing news just keeps on coming, and today is no exception. The National Association of Realtors just reported on June existing home sales, and this is what the data showed:

* Sales dropped 3.8% to a seasonally adjusted annual rate of 5.75 million from a revised 5.98 million SAAR in May (previously reported as 5.99 million). That was worse than economists' forecasts of a 5.86 million SAAR and it leaves sales at the lowest rate since November 2002 (5.73 million). June sales were down 11.4% from 6.49 million a year earlier. Sales fell in all regions, with the biggest decline in the Northeast (-7.3%) and the smallest in the South (-1.7%)

* For sale inventory came in at 4.196 million single-family homes, condos, and co-ops. That was down 4.2% from 4.378 million in May, and up 12.3% from 3.738 million in June 2006. On a months supply at current sales pace basis, inventory was 8.8 months, unchanged from a downwardly revised 8.8 months in May and up from 6.9 a year earlier. We have data going back further for the single-family only market. The months supply figure there was 8.7, the highest since June 1992.

* Median prices rose 3.3% to $230,100 in June from $222,700 in May. May's figure was previously reported as $223,700. Prices were actually up slightly, by 0.3%, from $229,300 in June 2007. That snapped a record 10-month string of year-over-year price declines.

So what's the story here? We still have a weak housing market. Sales are running at their lowest level in almost five years and inventories remain extremely high. The recent carnage in the mortgage finance industry should also make it harder for some home buyers to obtain loans. That will knock additional demand out of the market. And that's why I can't get too excited about the blip lower in home inventories and the slight rise in median prices.

In sum, buyers still have the upper hand and sellers can't afford to mess around. A lasting rebound isn't likely until the back half of 2008 at the earliest.