Affordability is at a record high, yet home sales are lower than expected for these conditions. Partly to blame is limited access to credit, which is keeping many potential buyers on the sidelines.

According to the National Association of Realtors®, President Ron Phipps, lowered mortgage loan limits set to take effect on October 1st is prompting some lenders to take precautions on loans they anticipate may not close until after the cut-off date. These stauncher loan limits are already causing contract cancellations, which in turn eased existing-home sales in June.

Lawrence Yun, NAR chief economist, said this is an uneven recovery. “Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month,” he said. “The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year.”

Regionally, the Northeast took the hardest hit, down 5.2 percent in June. This region is now 17.0 percent below June 2010. This is the largest deficit in existing-home sales of any region.

The Midwest had the second worst report, down 14.0 percent from last year. However, the Midwest rose a marginal 1.0 percent in June.

The South and West fared little better. The West was down 1.7 for the month and the South only rose 0.5 percent.

Phipps reports, “With record high housing affordability conditions thus far in 2011, we’d normally expect to see stronger home sales. Even with job creation below expectations, excessively tight loan standards are keeping many buyers from completing deals. Although proposals being considered in Washington could effectively put more restrictions on lending, some banking executives have hinted that credit may return to more normal, safe standards in the not-too-distant future, but the tardiness of this process is holding back the recovery.”

Economic uncertainty continues to put pressure on the housing market. A home purchase is one of the largest financial transactions a person will make and in an economy where the unemployment is over 9 percent and rising, buyers are unwilling to enter the market.

This has caused an oversupply of homes. Total housing inventory was up another 3.3 percent in June and is now at a 9.5 month supply.

Investor and all-cash activity is still high. Investors made up 19 percent of all purchases in June, up 6 percent from June 2010. All-cash purchases, largely investors, was also up year-to-year, now at 29 percent of all sales from 24 percent in June 2010.


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