Home Resales Fall 2.2% in August

from The Wall Street Journal
Sept. 24, 2008
http://online.wsj.com/article/SB122226123307770911.html

Sales of previously owned homes declined in August, but in a promising sign the backlog of unsold homes shrank.

Sales of existing homes fell 2.2% in August from the previous month to an annual sales pace of 4.91 million units, the National Association of Realtors said Wednesday. The data cover sales of homes, condominiums, and townhouses.

The inventory of unsold houses fell to a 10.4-month supply at the current sales pace, compared to July's 10.9-month supply. The current inventory is still large and many analysts say prices must fall even more to attract buyers. The median home price was $203,100 in August, down 9.5% from the year before.

"We would not expect to see any real stability in the housing market until we work off more of this inventory," said Wachovia Corp. economist Adam York in a note to clients.

Sales increased in parts of California, Florida and Nevada where subprime loans and foreclosures are heavily concentrated, the NAR said. Chief economist Lawrence Yun noted that sales of deeply discounted properties "are accounting for a disproportionately high level of sales in the current market" and helping to drive down the median sales price.

Efforts to work through bloated inventories may be hampered by the financial crisis on Wall Street.

"Home sales will be constrained without a freer flow of credit into the mortgage market," Mr. Yun said. "The faster that happens, the sooner we'll see a broad stabilization in home prices that in turn will help the economy recover."

But lenders continued in the second quarter of 2008 to toughened standards on home loans, the Federal Reserve's latest quarterly survey of senior loan officers at U.S. banks showed. About 75% said they tightened standards on prime mortgages, and that tightening is expected to continue this year.

Besides tighter loan standards and falling prices, the housing market also has been hurt by a weakening job market. Nonfarm payrolls have declined for eight consecutive months.

Regionally, sales of existing homes declined 6.6% in the Northeast and 5.3% in the West. Sales rose 0.9% in the Midwest and 0.5% in the South.

Write to Jeff Bater at jeff.bater@dowjones.com