Home Resales Fall in August

Washington, DC, Sept. 24, 2008--Existing-home sales were down in August following a healthy gain in July as tight mortgage credit curtailed activity, according to the National Association of Realtors.

Sales rose in the Midwest and South but fell in the Northeast and West. 

Nationally, existing-home sales -- including single-family, townhomes, condominiums and co-ops -- declined 2.2 percent to a seasonally adjusted annual rate of 4.91 million units in August from an upwardly revised pace of 5.02 million in July, but are 10.7 percent below the 5.50 million-unit pace in August 2007.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the pendulum in the mortgage market has swung too far.

"The difficulty in obtaining a mortgage increased over past couple months, making it more challenging for creditworthy borrowers to find financing," he said.

"Our hope is that overly tight lending criteria can be loosened with reasonable standards and credit so that sales activity can catch up with demand.  Interest rates have already declined, but there is a serious question as to whether a cash infusion by the U.S. Treasury into Wall Street would help consumers by improving mortgage funding." 

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.48 percent in August from 6.43 percent in July; the rate was 6.57 percent in August 2007. However, last week the 30-year fixed had dropped to 5.78 percent.

Lawrence Yun, NAR chief economist, said the recent drop in interest rates is an immediate impact of recent government action.

 "August sales reflect higher interest rates before the government takeover of Freddie Mac and Fannie Mae, and the sudden drop in mortgage interest rates over the past couple weeks is improving housing affordability," he said.

"With higher loan limits and a beefing up of the FHA program, all the mechanisms have been falling into place to increase mortgage availability. However, home sales will be constrained without a freer flow of credit into the mortgage market.  The faster that happens, the sooner we'll see a broad stabilization in home prices that in turn will help the economy recover."

The national median existing-home price for all housing types was $203,100 in August, down 9.5 percent from a year ago when the median was $224,400.

Single-family home sales slipped 1.4 percent to a seasonally adjusted annual rate of 4.35 million in August from an upwardly revised pace of 4.41 million in July, but are 9.6 percent below the 4.81 million-unit level a year ago. 

Existing condominium and co-op sales dropped 8.2 percent to a seasonally adjusted annual rate of 560,000 units in August from an upwardly revised level of 610,000 in July, and are 19.0 percent below the 691,000-unit pace in August 2007.