The 7.6 percent boost in existing home sales in August reported today was a somewhat natural bounce from an earlier freefall. It put home sales at 4.13 million, slightly higher than the 4.05 million analysts had expected, according to the National Association of Realtors (NAR) monthly report.
“Home sales were only able to rise by this much in August because they had fallen so far in the months after the homebuyer tax credit expired,” said Paul Dales, economist with Capital Economics.
The jump reversed only a small part of the 34 percent plunge since April, when the $8,000 tax credit expired. Even after the August boost, sales remain at their second lowest level in 14 years, much of which is tied to low consumer confidence, weak job growth and tight mortgage credit. The report also revised July’s sales figures from 3.83 million to 4.13 million. In July, existing home sales plunged 27.2 percent.
Existing, or previously owned, home sales are completed transactions that include single-family, townhomes, condominiums and co-ops. While the August increase was better than expected, homes sales are still below the more than 5 million in August 2009, said Walter Molony, spokesperson with NAR. “The housing market is trying to recover on its own power without the home buyer tax credit,” said Lawrence Yun, NAR economist. “Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty.”
The national median existing-home price for all housing types was $178,600 in August, up 0.8 percent from a year ago. Upper-end home sales are bucking national trends. Homes ranging from $750,000 to $1 million saw a 4.6 percent increase in sales from one year ago and homes valued at more than $1 million saw sales jump 11.5 percent from August 2009. Although these categories make up a little less than two percent of the overall market, a year ago they were “dead in the water,” Molony said.
According to a survey by mortgage giant Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.43 percent in August from 4.56 percent in July. This compared to 5.19 percent in August 2009.
Even without the tax credit, economists predict home sales will rise further. NAR expects to see sales rise to 4.5 million by the year’s end as home values continue to stabilize. However, the 9.6 unemployment rate remains a threat and home sales could fall again, Dales warns.
Moody’s economist Celia Chen says a true recovery in home sales won’t occur until late 2011, assuming low mortgage interest rates and improved job growth. She expects by that time, “the foreclosure wave will begin to abate and the market will have cleared out some of the excess inventory that is weighing prices down,” she said.
