Existing-Home Sales Holding at a Sustainable Pace

Both sales and prices down but leveling off

WASHINGTON (September 25, 2006) – Existing-home sales stabilized at a sustainable pace in August, while home prices showed an anticipated decline, according to the National Association of Realtors^®.

Total existing-home sales – including single-family, town-homes, 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 July, 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 price² 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.

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

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. At the same time interest rates have moderated, so there are good opportunities for buyers in today’s market.”

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.

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.

The National Association of Realtors^®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

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¹The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

²The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.

³Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

Existing-home sales for September will be released October 25. The next Pending Home Sales Index will be on October 2 and the forecast will be revised October 11.