Home Sales Fall

Reversal follows four-month gain

By Alan Zibel
The Associated Press

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WASHINGTON — Four steps forward, one step back.

Home resales dipped unexpectedly 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 called the drop temporary and said they expected 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 reduced to an 8½-month supply at the current sales pace. That's the lowest level in more than two years.

Fewer foreclosures have been coming on to the market in Phoenix, for example, cutting down the number of homes for sale from about 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 if they will drop after the Nov. 30 sunset of a tax credit of up to $8,000 for first-time home buyers.

"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 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 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.

Nearly 7 million homes are destined for foreclosure, making up a huge "shadow inventory" of homes that haven't gone on the market, according to a report by Laurie Goodman, an analyst with Amherst Securities Group.

"That housing overhang is the single largest impediment to a recovery in the housing market," Goodman wrote this week.

Nationwide, sales fell to a seasonally adjusted annual rate of 5.1 million in August, from a pace of 5.24 million.