From the Otteau Group:
SUMMER MARKET REMAINS COOL
July was another cool month for the housing market as declining buyer-confidence continued to take its toll on home sales. In July, contract-sales activity declined 11% from the June level and was 25% below the year earlier pace in July 2005. That this slowdown comes in the midst of the prime March-to-August selling season when home sales should still be running hot provides compelling evidence of a market transition wherein home buyers have greater control over final selling prices than at any time since 1991, a 15-year span.
From an inventory perspective, the number of homes being offered for sale now stands 67% higher than a year ago. This equates to a 9-month supply as compared to only 4-months last year at this time. It is however encouraging to note that Unsold Inventory increased by only 1.5% in July following a 47% increase over the 1st 6 months of the year, which works out to nearly 8% per month over that period. This moderation, coupled with recent declines in mortgage rates present home buyers with an opportunity window that will likely close once mortgage rates continue their upward climb.
From a price perspective, market conditions continue to exhibit the greatest weakness for luxury priced homes. As shown in the table at right, Unsold Inventory below $600,000 stands at an 8 month supply as compared to 27-months above $2.5 million. This weakness in the luxury market has been developing slowly for several years now and will likely continue for the foreseeable future. As a result, expect the market for more affordably priced homes to be the first to recover.