Home Sales Ahead: Temporary Decline or New Downward Trend?

<div class="imageNone" style="width: 598px;"><img id="5919" class="imgPhoto" title="Real Estate" src="http://img.ibtimes.com/www/data/articles/full/2009/10/19/5919.jpg" alt="Prospective home buyer Jessica Doctoroff talks to her real estate agent Stephen Bremis (R) while viewing a condominium for sale in Somerville, Massachusetts April 2, 2009. REUTERS/Brian Snyder" width="598" />

<div class="caption">Prospective home buyer Jessica Doctoroff talks to her real estate agent Stephen Bremis (R) while viewing a condominium for sale in Somerville, Massachusetts April 2, 2009. REUTERS/Brian Snyder</div>

</div>

Will a decline in home sales in one of the most recent reports be a temporary dip in the U.S. real estate market or possibly a new downward trend with implications for the entire U.S. economy?

That's the question many investors, real estate professionals, home-sellers, home-buyers, economists and policy makers are asking just ahead of this Friday's closely watched report from the National Association of Realtors set to reveal existing-home sales in the U.S. for September.

Nearly a month ago, the NAR reported that existing home sales fell in August after 4 consecutive months of gains. The organization's monthly reports are part of its informational and political efforts to help its members become more profitable and successful in their real estate work.

August sales data showed existing-home sales fell 2.7 percent to 5.1 million units, down from 5.24 million in July, adjusting for seasonal fluctuations. The figures include single-family homes, town homes, condominiums and co-ops.

NAR derives its estimates from data created by realtors across the U.S. who submit information into regional listing services. That data is then compiled into a Multiple Listing Service (MLS). The free reports found on NAR's website includes sales reports at the nation, regional, and some metro area levels.

<strong>Assessment</strong>

Lower sales in August were due to the "rising numbers of contracts entering the system," according to NAR economist Lawrence Yun. He said some of those reduced sales were due to "fallouts and a backlog contributing to a longer closing process."

The rise in sales was partly a result of the government's economic stimulus, he said. The credit "is having the intended impact of bringing home buyers into the market."

Yun had previously predicted after the release of July's data that there would be a "gradual uptrend" in sales due to the federal tax credit for first time home buyers.

<strong>Inventories Falling</strong>

Beyond sales, other data, such as inventories, can give real estate watchers information about the state of the market.

The number of houses on the market generally declined during the past year despite some fluctuations. The inventory of U.S. existing homes stood at 3.622 million units in August compared to a peak of 4.163 million in November of 2008.

Inventories can also be classified in terms of the number of months required to sell all homes currently on the market. That figure was 11 months in November last year and 8.5 months in August.

<strong>Sale Prices</strong>

The report also includes home prices, with median sale at $177,700 in August, down from $181,500 in July on an adjusted basis. Prior to the price decline in August, home prices had risen for the previous four months.

Regionally, the Northeast U.S. had the highest median home prices in August at $241,000, with the West, South, and Midwest trailing at $220,500, $157,400, and $149,000 respectively.