WASHINGTON - Sales of previously owned homes rebounded strongly in August as falling interest rates lured buyers into the real estate market, an industry report said.
Sales rose 9.3% last month to an annual pace of 5.27 million units after a 9.2% plunge in July, the National Association of Realtors said. The August increase was the biggest since a 10.9% gain in June 1999.
"We've had a very strong economy," said Fred Flick, the trade group's vice president for economic research. "Interest rates are still relatively low; job growth is still strong. And all that spells very good news for the housing market."
Analysts had expected home resales in August to rise to a 4.95 million-unit pace from July's 4.79 million-unit pace, the lowest rate in five months.
Sales rose in all four regions, led by the West. The supply of homes for sale fell to 3.7 months' worth in August, from 4.3 months' worth in July.
"The big thing keeping people from buying a house now is finding a house," said Tom Black, director of secondary marketing at MortgageIT.com in Boston. "The inventories are still really low, especially in desirable areas."
The median price of a home fell 0.8%,to $142,200 in August, from a record $143,300 in July. With the economy showing signs of slowing after six Fed interest rate increases since June of last year, mortgage rates have started to fall on expectations that further increases will not be needed the rest of the year.
"The stock market has stalled, and income growth is moderate, so there are many reasons to expect home sales should moderate," said Jim Glassman, a senior economist at Chase Securities in New York.
The average rate on a 30-year mortgage has been below 8% since the middle of August. That compares with a five-year high of 8.64% in May. Sales of previously owned homes, which account for 85% of all houses on the market, are considered an important gauge of consumer demand. Home sales can stimulate spending on furniture, appliances, and interior decorating.
An abundance of jobs has also buoyed consumer confidence and kept home sales afloat. The August unemployment rate was 4.1%, close to a 30-year low, and the Conference Board's consumer confidence index was 141.1, close to January's record high of 144.7.