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Existing Home Sales Rise in August

The National Association of Realtors reported that existing home sales increased to 5.03 million in August from 4.67 million in July.

Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 7.7 percent to a seasonally adjusted annual rate of 5.03 million in August from an upwardly revised 4.67 million in July, and are 18.6 percent higher than the 4.24 million unit level in August 2010. Total housing inventory at the end of August fell 3.0 percent to 3.58 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.5-month supply in July.

The following graph from Calculated Risk displays the long-term view of the existing home sales trend.

Aside from the volatile moves in late 2009 and 2010 that were engendered by government stimuli, existing home sales have held in the 5 million area since 2008. The months of supply metric remains elevated at 8.5 months, although its peak in 2011 was well below the previous highs of the last four years.

The residential real estate market continues to repair the damage inflicted by the massive bubble that imploded last decade. The lack of downward progress in the existing home sales trend and the gradual improvement in the months of supply metric suggest that the excess supply created during the speculative frenzy of the bubble years is being integrated into the market, albeit very slowly. Although a strong rebound in housing is highly unlikely anytime during the next several years, the lack of additional deterioration in sales data suggest that a long-term bottoming process may be in progress.