Sales for existing homes fell again in June, according to the National Association of Realtors. They declined by 5.1%, after a 2.2% drop in May. This might not seem surprising, since the home buyer credit ended way back in April, and lots of demand died with it. But the NAR's data doesn't fully take this into account, since it includes only completed sales, while the credit's rules only required sales to have begun by the end of April. If mortgage applications for purchases, which are more forward looking, are any indication, we should see a much steeper drop throughout the rest of the summer months. But let's see what else the NAR's report for June reveals.

First, it's always nice to put the recent data into perspective through a chart:

existing home sales 2010-06.PNG

You can see that, although sales declined compared to May, June sales were still higher than they were a year earlier, up 9.8%. But they don't have to fall much further to hit 2010 lows. That will happen if they dip below the annualized rate of 5 million. In June, the rate was 5,370,000.

Inventory is also quite relevant when judging housing market health. It increased in June by 2.5%. A rise was expected, given that sales declined while foreclosures remained high. Here's the chart:

existing home inventory 2010-06.PNG

You can see that inventory is approaching a new high. If sales decline throughout the rest of the summer as predicted, we'll probably see a new level hit.

But home prices continued to defy logic in June. Even though sales declined and inventory rose, the median price of an existing home increased by 5.2% in June, to $183,700 from $174,600 in May. June marked the fourth consecutive monthly price increase. This probably indicates that banks are doing a good job of managing supply. But if a deeper dip in sales and steeper rise in inventory could quickly change this trend.

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