Existing Home Sales Up, But Down Compared to Earlier this Year

The National Association of Realtors (NAR) August 2010 home sales increased month-over-month (MoM), but are down YoY.  Their press release in part:

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 4.13 million in August from an upwardly revised 3.84 million in July, but remain 19.0 percent below the 5.10 million-unit pace in August 2009.

Lawrence Yun, NAR chief economist, said home sales still remain subpar. “The housing market is trying to recover on its own power without the home buyer tax credit. Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty,” Yun said.

According to 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; the rate was 5.19 percent in August 2009.

Yun added, “Home values have shown stabilizing trends over the past year, even as the economy shed millions of jobs, because of the home buyer tax credit stimulus. Now that the economy is adding some jobs, the housing market needs to steadily improve and eventually stand on its own.”

The national median existing-home price2 for all housing types was $178,600 in August, up 0.8 percent from a year ago. Distressed homes3 rose to 34 percent of sales in August from 32 percent in July; they were 31 percent in August 2009.

Econintersect only looks at non-adjusted data which appears consistent with the adjusted data.

Prices also improved modestly in August.

The difference between the Case-Shiller prices and the NAR is due to methodology.  Case-Shiller only uses sales where a previous sale can be identified in only 20 urban areas.  The NAR uses all sales.

The concern at this point is the drop in inventory.  The only explanation is that more and more homes are being removed from the market because they did not sell.  Likely, many are being turned into rental property, and are part of a shadow inventory which will come onto the market when it improves.  This is will moderate any future recovery.

In the view of Econintersect, existing home sales and home values will begin to be under pressure beginning next month due to low volumes (lack of buyers).  Home mortgage applications are running at record low levels for 2010.

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