* August existing sales beat expectations
* Home prices fall y/y, helping affordability
By Jason Lange
WASHINGTON, Sept 21 (Reuters) - Existing home sales rose
more than expected in August to their highest level in five
months as falling prices and low interest rates drew more
buyers into a still moribund market.
The data did little to change the view that housing,
hobbled by a burst bubble which triggered a major recession,
will not help the economy much anytime soon.
Sales climbed 7.7 percent from the previous month to an
annual rate of 5.03 million units, the National Association of
Realtors said on Wednesday. The median price was 5.1 percent
lower than a year earlier.
"This housing market is still very distressed," said
Michael Hanson, an economist at Bank of America Merrill Lynch
in New York.
"We have to get a lot of good news for a meaningful
turnaround in the housing market," he said.
The outlook for housing prices remains grim. A survey by
MacroMarkets LLC showed economists expect home prices to rise
just 1.1 percent a year through 2015.
That is less than a third of the annual pace clocked in the
13 years that preceded the housing bubble, the survey found.
Falling prices can make housing look like a poor investment for
A separate report showed applications for mortgages edged
up last week on higher refinancing activity, but were held back
by a lack of demand for purchases, according to the Mortgage
Graphic - U.S. existing home sales:
Graphic - U.S. mortgages:
Existing home sales have trended lower in 2011 and prices
are still weakening. One factor keeping prices low is the high
rate of "distressed sales" which include those forced by
Distressed sales accounted for 31 percent of August
transactions, up from 29 percent a month earlier.
In an attempt to breathe new life into the sector and the
wider economy, the U.S. Federal Reserve is keeping interest
U.S. stocks drifted lower as investors awaited the Fed's
The Fed is expected to hold interest rates near zero
following a two-day policy review that concludes on Wednesday,
and many expect policymakers will unveil new measures to ease
credit further. The Fed's policy has helped keep mortgage rates
At the same time, some other props for the sector are set
to fall away. At the end of this month, the size of the loans
federal housing agencies can purchase will fall, and next year
government-controlled mortgage companies Fannie Mae and Freddie
Mac will begin to raise fees on the loans they purchase.
NAR economist Jed Smith was nevertheless upbeat that the
prices could stabilize soon because he said inventories would
likely decline over the winter.
"(That) would be very conducive to definitive price
stabilization," he told reporters.
Total housing inventory fell 3.0 percent to 3.58 million
existing homes available for sale, equivalent to an 8 1/2 month
supply, the NAR said.
The NAR said the increase in sales came despite some
disruptions from Hurricane Irene, which battered much of the
East Coast at the end of the month.
Economists polled by Reuters had expected sales to rise 1.4
percent to a 4.71-million-unit pace. Compared to August 2010,
sales were 18.6 percent higher.
The NAR's estimate for the pace of existing home sales
during July was unchanged.
(Additional reporting by Richard Leong and Leah Schnurr in New
York; Editing by James Dalgleish and Andrew Hay)
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