Existing home sales slumped 2.7% in August from July, surprising many economists who expected a small increase in today’s National Association of Realtors (NAR) release. Average selling price fell 2.2% from July as well.
NAR: “Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus. The first-time buyer tax credit is having the intended impact of bringing buyers into the market, allowing them to take advantage of very favourable affordability conditions,” he said. “Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process, but the decline demonstrates we can’t take a housing rebound for granted.”
As shown below, the latest data points are a reversal, or at best a stagnation, from what was an improving trend over the last five months.
NAR’s economist Lawrence pitched for an extension of the first-time buyer tax credit by warning that rising foreclosures in the next twelves months would require a steady supply of buyers if prices are to hold. That doesn’t sound encouraging.