September 24, 2009
The housing market isn't out of the woods just yet. Sales of existing homes fell 2.7 percent from July but remain ahead of the level in August 2008, according to the National Association of Realtors.
The buyers who did venture into the market continued to find bargains, as the average sale price dipped to $177,000, down more than 12 percent from a year ago.
"Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus," said Lawrence Yun, NAR's chief economist. "The first-time buyer tax credit is having the intended impact of bringing buyers into the market, allowing them to take advantage of very favorable affordability conditions."
Lower rates have also helped drive sales over the summer. According to Freddie Mac, the national average rate for a 30-year, conventional, fixed-rate mortgage fell to 5.19 percent in August from 5.22 percent in July; the rate was 6.48 percent in August 2008.
An NAR practitioner survey shows first-time buyers purchased 30 percent of homes in August, and that distressed homes accounted for 31 percent of transactions; both were unchanged from July.
"The recent trend shows broad improvement in most of the country, but with an expected rise in foreclosures over the next 12 months we need to maintain a healthy level of ready buyers to absorb the inventory. An extension of the tax credit is critical to preserve incentives for financially qualified buyers to enter the market," Yun said.
He added that many buyers had been on the sidelines during the past few years, waiting for signs of stabilization.
"Now that the market is showing some momentum, we have an opportunity to achieve a more rapid and broader stabilization in home prices. Extending and expanding the tax credit also would help to keep other families from becoming upside down in their mortgages or risk foreclosure," Yun said.
Though credit remains relatively tight, Yun predicts that will change when home prices show sustained gains.
"Stable home values will also allow more families to purchase consumer products and provide a strong boost for the broader economy," Yun said.
Total housing inventory at the end of August fell 10.8 percent to 3.62 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.3-month supply in July. Unsold inventory totals are 16.4 percent lower than a year ago.
