NAR: Home Sales, Prices Decline in August

"We expect an adjustment in home prices to last several months as we work through a build-up in inventory," says NAR Chief Economist David Lereah.
REALTOR® Magazine Online
Existing-home sales and prices slipped slightly in August to a sustainable pace, as was expected, the NATIONAL ASSOCIATION OF REALTORS® reports.

Total existing-home sales — including single-family, townhomes, condominiums and co-ops — slipped 0.5 percent in August to a seasonally adjusted annual rate of 6.30 million units from a level of 6.33 million July. Sales were 12.6 percent lower than the 7.21 million-unit pace in August 2005, which was the second highest on record.

“After a stronger-than-expected drop in July, the fairly even sales numbers in August tell us the market is at a more sustainable pace,” says NAR Chief Economist David Lereah. “It keeps us on track to see the third highest sales year on record, but we do expect an adjustment in home prices to last several months as we work through a build up in the inventory of homes on the market.”

The national median existing-home price for all housing types was $225,000 in August, down 1.7 percent from August 2005 when the median was $229,000. The median is a typical market price where half of the homes sold for more and half sold for less.

“This is the price correction we’ve been expecting. With sales stabilizing, we should go back to positive price growth early next year,” Lereah says.

Total housing inventory levels rose 1.5 percent at the end of August to 3.92 million existing homes available for sale, which represents a 7.5-month supply at the current sales pace — the highest supply since April 1993.

Assess Market When Setting Price

Sellers need to price to current market conditions if they want to sell within a reasonable amount of time, says NAR President Thomas M. Stevens from Vienna, Va.

“In some areas, home sellers are not making sufficient adjustments in their listing price, so their homes are staying on the market and contributing to the build up in inventory,” says Stevens, senior vice president of NRT Inc.

“Sellers are starting to become more realistic, and that could provide some lift to home sales because there is a healthy underlying demand from household growth and job creation,” he says. “At the same time interest rates have moderated, so there are good opportunities for buyers in today’s market.”

30-Year Rates Decline in August

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.52 percent in August, down from 6.76 percent in July; the rate was 5.82 percent in August 2005. Last week, the 30-year fixed dropped to 6.40 percent.

Single-family home sales held at a seasonally adjusted annual rate of 5.51 million in August, unchanged from July, but were 12.3 percent lower than the 6.28 million-unit pace in August 2005. The median existing single-family home price was $225,700 in August, down 1.7 percent from a year ago.

Existing condominium and cooperative housing sales fell 3.5 percent to a seasonally adjusted annual rate of 793,000 units in August from an upwardly revised 822,000 in August, and were 14.5 percent lower than the 928,000-unit pace in August 2005. The median existing condo price3 was $223,200 in August, down 2.4 percent from a year earlier.

Regional Sales Data

Regionally, existing-home sales in the Northeast rose 1.9 percent to a pace of 1.07 million in August, but were 11.6 percent below August 2005. The median existing-home price in the Northeast was $271,000, down 3.9 percent from a year earlier.

Existing-home sales in the Midwest rose 0.7 percent in August to a level of 1.44 million, but were 11.1 percent lower than a year ago. The median price in the Midwest was $176,000, which is 1.1 percent below August 2005.

Existing-home sales in the South slipped 0.8 percent to an annual sales rate of 2.51 million units in August, and were 7.4 percent below August 2005. The median price in the South was $184,000, down 2.6 percent from a year ago.

Existing-home sales in the West dropped 2.3 percent to an annual pace of 1.29 million in August, and were 22.8 percent lower than a year earlier. The median price in the West was $345,000, up 0.3 percent from August 2005.