Home sales jump in August: why it's not enough to revive housing market
Even as home sales increased in August, median prices fell. Experts point to a 'shadow inventory' of homes that will eventually face foreclosure and say prices won't keep up with inflation for years.
Americans bought nearly 8 percent more homes in August than in July, a welcome sign of progress for the still-troubled US housing market.Skip to next paragraph
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For the first time since April, sales of previously owned homes rose to an annualized rate of more than 5 million per year. The median sales price was $168,300, down from $177,300 a year before, the National Association of Realtors reported Wednesday.
Despite the gains in sales volume, unsold inventory fell only slightly, to 3.6 million units for sale. And housing market experts say the additional "shadow inventory" remains large, including homes held by delinquent borrowers who will eventually face foreclosure.
The problem is reflected in a new forecast that US home prices, on average, will not keep pace with inflation over the next four years. Home prices are likely to post nominal gains of about 1 percent a year through 2015, according to a MacroMarkets poll of a diverse group of 111 economists and real estate experts.
By comparison, the Federal Reserve expects inflation to run as much as 2 percent a year over that time.
“Markets and government institutions are visibly struggling to respond consistently to an unprecedented rash of crises and conflicts," Mr. Shiller said in releasing the survey Wednesday. "These struggles diminish confidence" within the private sector, he said.
A slow recovery for the housing market would mean that millions of mortgagees remain in a "negative equity" position, with loan balances exceeding the value of their homes.
Still, even a modest rise in home prices would represent some stabilization in a market that has seen dramatic swings over the past decade or so.
For 6-1/2 years starting in 2000, home prices rose by about 10 percent a year, according to Shiller's data. In the most recent five years, prices have fallen by 7 percent a year.
The difficulties of the housing market – from relatively tight credit conditions for new borrowers to weak conditions for home builders – continue to restrain overall economic growth, forecasters say.
A big question is what can be done to aid a housing recovery and work through the backlog of properties in or near foreclosure.