Home Sales Stall Even As Mortgage Rates Are Low

Home sales figures across the country for July came in well below expectations — especially in western states. That could be, in part, because Wells Fargo stopped taking applications and locking in rates for Fannie, Freddie and FHA-backed loans. New rules for such loans go into effect Oct. 1.

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DAVID GREENE, host:

And sales of existing homes have stalled again. Home sales in July fell 3.5 percent, far worse than what analysts had expected. While sales did improve slightly in the Northeast and the Midwest, they declined sharply out West.

NPR's Richard Gonzales explains why.

RICHARD GONZALES: Home sales in the West fell 12.6 percent, largely due to tightening credit, says Walter Molony, a spokesman for the National Association of Realtors.

Mr. WALTER MOLONY (Spokesman, National Association of Realtors): Banks are denying mortgages to many credit-worthy potential buyers, and they're offering loans, really, only to the most qualified buyers.

GONZALES: And denying credit-worthy buyers a loan is the difference between a sluggish economic recovery and a more robust one, says Molony. In addition, Wells Fargo Bank this week stopped taking loan applications and locking in rates for Fannie, Freddie and FHA-backed loans. That effectively ends higher loan limits, and the impact is felt most strongly in the mid-to-high-end housing markets of coastal California. Again, Walter Molony.

Mr. MOLONY: So California was the real factor that pulled down Western home sales.

GONZALES This slowdown in the sales of existing homes comes at a time when mortgage interest rates are running exceedingly low. The average on a 30-year, fixed-rate mortgage is down to 4.15 percent. Molony says that's the lowest since 1970.

Richard Gonzales, NPR News, San Francisco.

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