Existing homes sales down 2.7 percent in August but up 3.4 percent from a year ago

Dennis Norman

According to the latest report released today from the National Association of REALTORS(R), existing home sales in August dropped 2.7 percent to a seasonally adjusted rate of 5.1 million units down from a level of 5.24 million units in July. This drop follows four-consecutive months of increases in the pace of existing home sales and, if we were to finish out the year at the current sales pace, would put sales for 2009 up 3.8 percent over 2008 sales of 4,913,000 homes.

Along with the volume of home sales decreasing in August, median home prices decreased as well, falling 2.0 percent from July’s median home price of $181,500 to $177,700 for August. The August median home price is down 12.5 percent from a year ago when the median home price was $203,200. While prices were down for the month, the year-over-year drop improved for August as July’s prices were down 15.1 percent from the year prior.

I think these are positive numbers and shows a slowing of price degradation. As I have been saying lately I don’t believe the housing market has “hit bottom” yet, but seeing prices begin to level off would be a good start. As prices stabilize buyers will have more confidence in buying a home losing some of the fear they have of prices dropping after they buy.

We still have other issues to deal with such as the supply of new and existing homes out there for sale but August saw some improvement there as well as the supply of existing homes for sale dropped to 3,622,000 down 10.8 percent from July’s inventory of 4,062,000 and lowering the supply (based upon current sales rate) 8.6 percent from 9.3 months supply in July to 8.5 months supply for August. The inventory of existing homes for sale a year ago was 4,335,000 which was a 10.6 month supply so there has definitely been some positive progress with reducing inventory. Now to throw a little water on it…unfortunately my feeling is part of the reason the inventory is down is a result of the staggering rate of foreclosures and failed short sales that have taken homes “off the market” and are stuck in the foreclosure process which is been log-jammed in many ways. My concern is a couple of months down the road as these house begin re-emerging into the market after making it through the foreclosure process…I’m thinking we may see large numbers of homes hitting the market over the normally slower winter months which may very well drive inventory back up.

Lawrence Yun, NAR Chief Economist

OK, enough of my thoughts, now we’ll turn to a guy that actually has some letters behind his name and gets paid to say what he thinks about the housing market,Lawrence Yun chief economist for the National Association of REALTORS(R). Yun said the tax credit is working. “Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus. The first-time buyer tax credit is having the intended impact of bringing buyers into the market, allowing them to take advantage of very favorable affordability conditions,” he said. “Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process, but the decline demonstrates we can’t take a housing rebound for granted.”

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