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Existing-Home Sales Jump Nearly 19% From Last Year

09/21/2011BY: CARRIE BAY

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ales of previously owned homes came in 18.6 percent higher last month when compared to August 2010, according to data just released by the National Association of Realtors (NAR).

Completed transactions rose 7.7 percent on a month-over-month basis to a seasonally adjusted annual rate of 5.03 million, up from 4.67 million in July.

The latest numbers far surpassed market expectations. Many analysts were forecasting a decline while others were predicting a much more modest increase, with projections for the annual rate ranging between 4.61 million and 4.80 million.

The research firm IHS Global Insight issued its forecast last week ahead of NAR’s report, with a word of warning that the market should be expecting “the lowest sales pace in 10 months.”

The firm’s analysts explained their rationale on declining consumer demand to buy homes, even as mortgage rates have dropped to record lows.

They noted that in August, the Mortgage Bankers Association’s purchase index dropped for the fifth straight month, plunging 11.9 percent.

“Based on this reading, and on the 1.3 percent drop in the Pending Home Sales Index in July, we project that existing home sales dropped 1.3 percent to a 4.61-million-unit annual rate in August,” IHS said.

But Lawrence Yun, NAR’s chief economist, says he sees “some positive market fundamentals,” even in the face of such headwinds as tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene.

“Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations,” Yun said.

“Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation,” Yun added.

(developing story)