Sept. 26, 2005--Low interest rates and continued job growth pushed existing home prices to all-time highs last month, with total sales reaching the second-highest level on record, the National Association of Realtors reported Monday.
The strong returns came despite high energy costs and sagging consumer confidence, signalling a reprieve from an expected slowdown that would hit the bottom line of companies of all sizes, including those outside of the real estate industry, market watchers said.
By contrast, new home sales dropped by 9.9% over the same period, though prices continued to climb, Department of Commerce figures released Tuesday showed.
Sales of previously-owned single-family homes, townhouses, condominiums and co-ops increased 2.0% in August to 7.29 million, outpacing the 6.76 million unit sales reported in August 2004 by 7.8%, the NAR said. The increase last month was second only to a record-high 7.35 million sales last June. Sales of existing homes account for about 85% of the entire housing market. New homes make up the rest.
Also up last month were median prices for all housing types, hitting $220,000 in August, a 15.8% increase from the previous year and the strongest rate of appreciation since July 1979.
Split above and below that price, there were 2.86 million existing homes on the market, 3.5% more than the previous month. At the current sales pace, that represents a 4.7-month supply. Generally, a six-month supply indicates a balance of buyers and sellers.
At the same time, the decline in sales for new homes, the sharpest since last November, though 6.2% higher than August 2004, saw median prices climbing for the first time in four months to $220,300, the Department of Commerce reported. Some 1.237 million new single-family homes were sold in August, matching the pace set in January this year.
The NAR numbers released Monday showed little sign of an expected near-term slowdown in the housing market announced last month by Federal Reserve Chairman Alan Greenspan.
Bill Rossi, a professor of entrepreneurship at the University of Florida, any potential decrease in personal conumption should be cause for concern among small business owners. Small businesses across industries benefit when consumers "feel more wealthy" and are freer spenders as a result, he said. A decline in housing sales, he added, "is going to put a blanket over all of this."
The NAR figures for August suggest that has yet to happen. "Home sales are staying at very healthy levels," David Lereah, NAR's chief economist, said in a statement released Monday. "Housing inventory improved in August, but remain tight, and we have some way to go before we get into a range of balance between home buyers and sellers."
As a result, Lereah said, the above-normal price appreciation will continue "for the foreseeable future."
That includes any disruption to the market caused by Hurricane Katrina, which, coming late in the month, had no measurable impact on August sales, according to NAR President Al Mansell. The full affect of that storm, and Hurricane Rita this month, have yet to be assessed.
Still, Mansell said he expected to see a "mixed impact on figures" in the next few months, with losses in the hurricane disaster zones offset by sales from those fleeing the storm in nearby regions.
In August, the unemployment rate dropped to just 4.9%, with employers adding some 169,000 workers, according to Labor Department figures. At the same time, mortgage rates have hovered around the 5.21% record-low posted in June 2003.
By category, single-family home sales were up 1.9% to 6.35 million, selling at a median price of $219,400. Condos and co-ops rose 2.2% to 942,000 at a median $226,800.
Regionally, sales were up everywhere but in the South, where they dropped 0.4% from July. Median prices were highest in the West at $322,000, a 20.1% increase from the previous year.
The August figures for new homes will be released by the Commerce Department later this week.