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August Existing-Home Sales Fall on Temporary Mortgage Problems

September 26, 2007

WASHINGTON -- Existing-home sales fell in August when mortgage availability problems were peaking, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – were down 4.3 percent to a seasonally adjusted annual rate1 of 5.50 million units in August from a level of 5.75 million in July, and are 12.8 percent below the 6.31 million-unit pace in August 2006. 

Lawrence Yun, NAR senior economist, expected the decline. “The unusual disruptions in the mortgage market, including a significant rise in jumbo loan rates, resulted in a fairly high number of postponed or cancelled sales, with many buyers having to search for other financing when loan commitments fell through,” he said. “Lower sales contributed to a buildup of unsold inventory.”

Yun expects similar results for home sales in September. “Once we get through these disruptions, we’ll get a better sense of where the actual market is in late fall as conditions begin to normalize,” he said.

Total housing inventory rose 0.4 percent at the end of August to 4.58 million existing homes available for sale, which represents a 10.0-month supply3 at the current sales pace, up from a 9.5-month supply in July.

NAR President Pat V. Combs, from Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt, said the good news is that the mortgage picture is improving. “Mortgage interest rates have been declining and loan availability is improving,” she said. “Movements to enhance the FHA loan program and to raise the limits for conventional financing could provide additional relief, and it looks like the worse of the mortgage availability problem is behind us.

“The abundant choice of homes is permitting buyers to better negotiate price and terms. There are good opportunities in the market now, especially for first-time buyers.”

The national median existing-home price2 for all housing types was $224,500 in August, up 0.2 percent from August 2006 when the median was $224,000. The median is a typical market price where half of the homes sold for more and half sold for less.

“Price gains in the Northeast and Midwest were largely offset by a decline in the West, while the median existing-home price in the South was down slightly, demonstrating that all real estate is local,” Combs said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.57 percent in August, down from 6.70 percent in July; the rate was 6.52 percent in August 2006. Last week, Freddie Mac reported the 30-year fixed rate was down to 6.34 percent.

Single-family home sales fell 3.8 percent to a seasonally adjusted annual rate of 4.81 million in August from a pace of 5.00 million in July, and are 13.0 percent below 5.53 million-unit level in August 2006. The median existing single-family home price was $223,900 in August, which is essentially even with a year ago.

Existing condominium and co-op sales dropped 8.0 percent to a seasonally adjusted annual rate of 690,000 units in August from 750,000 in July, and are 11.7 percent lower than the 781,000-unit pace a year ago. The median existing condo price4 was $228,500 in August, up 2.1 percent from August 2006.

Regionally, existing-home sales in the Northeast slipped 2.0 percent in August to an annual pace of 1.00 million, and are 5.7 percent below a year ago. The median price in the Northeast was $282,300, up 3.6 percent from August 2006.

Existing-home sales in the South eased by 2.7 percent to a level of 2.20 million in August, and are 12.7 percent lower than August 2006. The median existing-home price in the South was $183,500, down 0.7 percent from a year ago.

Existing-home sales in the Midwest fell 5.2 percent to an annual rate of 1.28 million in August, and are 10.5 percent below a year ago. The median price in the Midwest was $177,100, up 3.1 percent from August 2006.

Existing-home sales in the West dropped 9.8 percent in August to a level of 1.01 million, and are 21.7 percent below August 2006. The median price in the West was $332,300, which is 3.8 percent below a year ago.

Source: The National Association of Realtors

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