Home sales drop 2.7% in August from July
— -- August home sales waned after growing strongly the past four months, a sign that the housing recovery hasn't yet hit its stride.
Sales of existing homes dropped 2.7% in August from July, the National Association of Realtors (NAR) reported Thursday. In the previous four months, sales had increased a total of 15%.
Sales fell to a seasonally adjusted annual rate of 5.1 million — below what many analysts had forecast, although still the second-highest level of sales activity in nearly two years.
"It's a little disappointing," says Lawrence Yun, chief NAR economist, adding that the drop in sales indicates a continued need for federal stimulus efforts. "We're on the cusp of a self-sufficient recovery. There may still be some consumer fear, and the stimulus measure is (aimed) at changing that."
The decline came even though the average interest rate on a 30-year fixed mortgage fell from 5.22% in July to 5.19% in August, according to Freddie Mac. It was at 5.04% for the week ended Sept. 24.
Home prices also slid. The national median existing-home price was $177,700 in August, down 12.5% from August 2008, according to the NAR report.
Prices may be down in part because distressed homes, which include foreclosed properties, made up about 30% of sales. Homes sold at foreclosure often go for prices as much as 20% below those of non-distressed properties.
Joel Naroff, of Naroff Economic Advisors, says the drop in sales does not mean that the housing recovery is faltering. Economic indicators often fluctuate as a downturn ends, he says, so no one should expect consistently better numbers each month.
"We're still moving forward," Naroff says.
One improvement is a shrinking inventory of unsold homes. At the end of August, that inventory represented an 8.5-month supply at the current sales rate, down from 9.3 months in July. Unsold inventory totals are 16.4% lower than a year ago.
Yun says the dip in sales shows the need for Congress to continue stimulus measures such as the tax credit of up to $8,000 for first-time home buyers. Buyers now have until Nov. 30 to close on a home to take advantage of the credit; first-time home buyers make up about 30% of home sales.
