U.S. home resales fall as a run of gains ends

Realtors report dip of 2.7% in August, but most economists say the drop is temporary.

By Alan Zibel
Associated Press Posted: Friday, Sep. 25, 2009

U.S. home resales fall as a run of gains ends

Realtors report dip of 2.7% in August, but most economists say the drop is temporary.

By Alan Zibel
Associated Press Posted: Friday, Sep. 25, 2009

Four steps forward, one step back.

Home resales dipped last month, falling 2.7

percent from a month earlier, the National Association of Realtors said Thursday, reversing steady monthly gains since April. Most economists, however, called the drop temporary and said they expect sales to strengthen later this fall.

"It doesn't change the underlying trend of improvement," said Dean Maki, chief U.S. economist at Barclays Capital.

But even if sales do turn upward again, Maki and other economists don't predict prices will follow. Though prices have stabilized this summer, many economists are forecasting a downward turn over the fall and winter and expect prices to finally hit bottom early next year.

Compared with a year ago, home sales are up 3.4 percent, and the inventory of unsold homes has been whittled down to an 8.5 month supply at the current sales pace. That's the lowest level in more than two years.

Fewer foreclosures have been coming onto the market in Phoenix, for example, cutting down the number of homes for sale from around 54,000 last year to about 31,000 today, said Floyd Scott, broker-owner of Century 21 Arizona-Foothills.

Sales this month should be ahead of August, Scott says. But he wonders whether they will drop after the Nov. 30 sunset of a tax credit of up to $8,000 for first-time homebuyers.

"It will be interesting to see what happens sometime around the first or second week of October," he said.

In Washington, real estate agents and home builders are lobbying hard for an extension of the credit.

Without it, they argue, the housing market will take a sharp turn for the worse.

First-time buyers purchased almost one in three homes in August. Together with investors snapping up foreclosures, they have provided most of the momentum in the market this year.

"Prices have just gotten so low in some places that investors can't resist," said Dave Denslow, an economics professor at the University of Florida.

After a long period in which it was clear that housing was headed in one direction - down - some still doubt the market is truly in recovery mode. Optimists say the bottom was reached earlier this year, but pessimists say there are simply too many foreclosed properties that have yet to be dumped on the market.

The drop in sales last month may reflect delays in completing sales due to tough lending standards and new rules for appraisals. Real estate agents say new rules, effective May 1, that were designed to limit conflicts of interest in the appraisal process are delaying or undermining sales because appraisals are coming in too low.

Foreclosures and other financially distressed sellers accounted for about 30 percent of the market last month. That's especially true in the West, where sales of homes under $100,000 were up 150 percent from a year ago.

Sales of homes priced at over $250,000 were down nationally, with the biggest drop of nearly 40 percent coming among homes priced over $2million.

Melissa Polce  mjpolce@kw.com  704-450-4335

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