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Housing Market Mixed

Showing some signs of cooling off or plateauing, especially as home prices continue to accelerate to record high levels, the broad U.S. housing market was mixed in August, with existing home sales recording a modest gain, while new home sales and housing starts both lost ground.

Sales of generally lower-priced existing homes, including starter homes for first-time buyers, advanced 2 percent, recouping most of July's 2.7 percent decline, the National Association of Realtors reported. Resales climbed to a seasonally adjusted level of 7.29 million units, hovering close to their 13-month high of 7.35 million units.

With mortgage rates still low, and more buyers than sellers in the market, existing home prices continue to shoot up, said David Lereah, chief economist of the National Association of Realtors. “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.”

The national median price for all housing types was $220,000 in August, up 15.8 percent from the August 2004 level of $190,000, according to Freddie Mac.

But hit hard was the market for more costly new homes, where sales declined 9.9 percent, to a seasonal level of 1.24 million units, giving up all of July's 5.3 percent increase and then some.

Taking note of the big shift, David Seiders, chief economist of the National Association of Home Builders, commented, “The Commerce Department's estimates of new home sales are subject to a high degree of sampling variability, particularly at the regional level. It's likely that the July report overstated the strength of sales and that the August report exaggerated the decline. The average for the July-August period is quite close to the second quarter average, and it appears that home sales are plateauing around near-record levels.”

With consumers starting to balk at higher home prices, and interest rates beginning to edge up, home builders may be pulling in their horns a bit, and housing starts slipped 1.3 percent, to 2 million units, the Commerce Department reported

Seiders said while “the housing market still is in very good shape, a modest cooling off may now be under way. Our surveys of builders show growing buyer resistance to elevated housing prices in many areas, and anticipated increases in interest rates have tempered the housing outlook to some degree.”

Housing By Region
Month-To-Month % Change

EXISTING HOME SALES HOUSING STARTS NEW HOME SALES
Source: U.S. Department of Commerce and National Association of Realtors
Northeast 1.7% -4.1% -22.0%
Midwest 1.9 -5.2 -10.6
South -0.4 -6.6 -2.2
West 5.6 13.3 -17.9


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