Sales of existing homes fall 3.5% in July (8 month low; high cancellation rate)

Marketwatch ^ | 8.18.11 | Steve Goldstein

[Free Vulcan]

WASHINGTON (MarketWatch) — Sales of existing homes fell 3.5% in July to an eight-month low, with a high cancellation rate again taking its toll on an already troubled market, according to data released Thursday.

The National Association of Realtors said sales fell to a seasonally adjusted annual rate of 4.67 million...Economists polled by MarketWatch had expected a 4.99 million annual rate.

The numbers for the second straight month went against the increase in pending home sales, again showing the difference between agreed and closed transactions.

[dragnet2]

What is interesting is that I’m seeing the same houses that have been on the market a year

We've seen second homes in resort areas for sale for 4 years.

The banks have the money to just sit on them.

Of course, the homes are literally going to hell from lack of upkeep...lol

[Mr Rogers]

I’m seeing unsold houses with prices continuing to drop. One near me has dropped from 400K to 300K (3500 sq ft, pool, 1 acre), but they’ve left it at 300K for 4-5 months. Very nice home, but they will probably need to drop further to sell it. It is not a repo and is in fine shape, but...$85/sq ft is about as high as anyone seems to be getting around here. Most are selling at $75 sq ft, if in good shape.

I’d like to sell my house and build on a lot we own, but building would cost me $100/sq ft plus my money already spent on the land.

Eventually prices will come up because you cannot build a house for what they are selling for right now, but not until the repos sell - and that looks like it will take 5+ years.

[Nachum]

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[Free Vulcan]

The problem is there is a time decay on these homes. The longer they sit the worse shape they get, and the lower their price. Banks are holding the mortgages I would imagined valued at the original loan amount. At some point they will have to be written down, which is why the Fed has been pumping money into the banks so as to effectively increase their default loan reserves to prevent insolvency.

I’m worried that in the end a great number of these houses will have to be torn down and taken as a near complete loss. This alone IMO is enough to collapse the banking system. This doesn’t even factor in if we have another round of new mortgage defaults.