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Existing Home Sales Dropped in August

Source: WSJ

Posted on 24 Sep 2009

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Existing-home sales in the U.S. unexpectedly fell in August, breaking a string of four increases as the housing market struggles to recover.

Separately, the number of U.S. workers filing new claims for jobless benefits unexpectedly declined last week, according to a Labor Department report Thursday. Meanwhile, total claims lasting more than one week also decreased.

Home resales decreased by 2.7% to a 5.10 million annual rate, the National Association of Realtors said Thursday.

Wall Street expected a sales rate of 5.39 million sales rate for previously owned homes.

"It was a mild retreat from a very strong gain," NAR economist Lawrence Yun said, adding the sales pace in August was the second highest in nearly two years. The highest was in July, when sales rose to 5.24 million, capping four increases in a row.

Distressed property sales have pushed prices lower, year over year. The median price for an existing home last month was $177,700, down 12.5% from $203,200 in August 2008.

Existing home sales have gone up four times in six months as a nascent economic recovery, rising affordability, and a big tax break offset tight financing conditions and a jobless rate expected to top 10%.

The government last week said U.S. housing starts rose to their highest level in nine months during August. New-home sales have climbed four straight times. The economy is seen having expanded in the third quarter, which ends Wednesday, after nine months of contraction. A 2.7% surge in retail sales last month was taken as a strong sign the recession is over and the economy has begun recovering; sales are a key indicator of consumer spending, which drives much of the economy.

A tax credit created as part of the Obama administration's economic stimulus package has spurred buying this year. But the $8,000 credit for first-time buyers is due to lapse Nov. 30. Realtors and builders are pressing Congress for an extension.

The average 30-year mortgage rate was 5.19% in August, down from 5.22% in July, Freddie Mac data show.

Sales year over year were up 3.4% from the pace in August 2008, Thursday's report said.

Inventories were down 10.8% at the end of August to 3.62 million available for sale. That represented an 8.5-month supply at the current sales pace, compared to 9.3 in July. The 8.5 figure is the lowest since April 2007. Weak demand for homes during the long recession had sent unsold supply through the roof, with the months' supply compared to the sales pace hitting 10.6 in August 2008.

Regionally, sales during May compared to April fell 2.2% in the Northeast, 3.1% in the South, and 6.6% in the Midwest. Sales rose 2.7% in the West.