by Calculated Risk on 9/25/2006 10:16:00 AM

The National Association of Realtors (NAR) reports: Existing-Home Sales Holding At A Sustainable Pace


Click on graph for larger image.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – slipped 0.5 percent to a seasonally adjusted annual rate1 of 6.30 million units in August from a level of 6.33 million Ju1y, and were 12.6 percent lower than the 7.21 million-unit pace in August 2005, which was the second highest on record.

David Lereah, NAR’s chief economist, said home sales appear to be leveling out. “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,” he said. “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 said.

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.

Existing Home Sales are a trailing indicator. The sales are reported at close of escrow, so August sales reflects agreements reached in June and July.

As I've noted before, usually 6 to 8 months of inventory starts causing pricing problem - and over 8 months a significant problem. With current inventory levels at 7.5 months of supply, inventories are now well into the danger zone and prices are falling in most regions.