August 2005 Existing Home Sales Remain Strong

Existing-home sales rose in August to the second-highest pace on record, with strong price gains in a market of tight supply, according to the National Association of Realtors®.

Total existing-home sales increased 2% in August to a seasonally adjusted annual rate1 of 7.29 million from a pace of 7.15 million in July. Sales were 7.8% higher than the 6.76 million-unit pace in August 2004; the record was 7.35 million in June of this year.

David Lereah, NAR’s chief economist, said the fundamental factors for housing remain positive. “With a general background of growing population and favorable affordability conditions, home sales are staying at very healthy levels,” he said. “Housing inventory improved in August but remains tight, and we have some way to go before we get into a range of balance between home buyers and sellers. As a result, we’ll continue to see above-normal home price appreciation for the foreseeable future.”

Total housing inventory levels rose 3.5% at the end of August to 2.86 million existing homes available for sale, which represents a 4.7-month supply at the current sales pace. Historically, a supply of around six months is reflective of a market in balance between home buyers and sellers.

The national median existing-home price for all housing types was $220,000 in August, up 15.8% from August 2004 when the median price was $190,000. The median is a typical market price where half of the homes sold for more and half sold for less. This is the strongest rate of appreciation since July 1979 when annual price growth was 17.2%.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.82% in August, up from 5.70% in July; the rate was 5.87% in August 2004.

Single-family home sales increased 1.9% to a record seasonally adjusted annual rate of 6.35 million in August from 6.23 million in June, and were 6.9% above the 5.94 million-unit level in August 2004. The median single-family home price was $219,400 in August, up 16.2% from a year ago.

Existing condominium and cooperative housing sales rose 2.2% to a seasonally adjusted annual rate of 942,000 units from an upwardly revised pace of 922,000 in July, and was second only to a record of 963,000 in June of this year. Last month’s sales level was 14.3% above the 824,000-unit pace in August 2004. The median condo price was $226,800, 2 up 14.5% from a year ago.

Regionally, total existing-home sales in the West rose 5.6% to a pace of 1.69 million units in August, and were 8.3% higher than August 2004. The median existing-home price in the West was $322,000, up 20.1% from a year ago.

Existing-home sales in the Midwest increased 1.9% to a record annual sales rate of 1.64 million in August, and were 6.5% higher than a year earlier. The median price in the Midwest was $176,000, which was 11.4% higher than August 2004.

Total existing-home sales in the Northeast rose 1.7% to an annual pace of 1.21 million in August, and were 8.0% above August 2004. The median price in the Northeast was $254,000, up 16.5% from a year ago.

Existing-home sales in the South slipped 0.4 in August to a level of 2.74 million, but were 7.5% higher than a year earlier. The median price in the South was $189,000, up 9.9% from August 2004.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1 million members involved in all aspects of the residential and commercial real estate industries.

1 - The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85% of total home sales, are based on a much larger sample – nearly 40% of multiple listing service data each month – and typically are not subject to large prior-month revisions.

2 - Because there is a concentration of condos in high-cost metro areas, the national median condo price is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

Source: The National Association Of Realtors 9/26/2005