Existing-home sales hit 8-month high

Posted by Elizabeth Strott on Thursday, July 23, 2009 10:33 AM on MSN Money

Inventories fall, adding hopes that the housing market is starting to recover.

Existing-home sales rose 3.6% in June to an annualized pace of 4.86 million, to the highest level since October, the National Association of Realtors reported this morning.

It was the third monthly increase in a row.

Economists had expected an annualized pace of 4.85 million last month. Sales are down 0.2% from June of 2008.

Inventories fell 0.7% to 3.82 million in June. At the current sales pace, it would take 9.4 months to sell homes on the market, an improvement from the 9.8 months in May.

A 7-month supply is typically consistent with stabilization in prices, NAR chief economist Lawrence Yun, said in a press conference. It may take until the end of this year or early 2010 before property values steady, Yun added.

So who's buying? Tax incentives are helping spark resale activity in lower-priced homes. The supply of homes under $250,000 is under a six-month supply, while the supply of homes over $1 million is over 20 months.

That excess supply is contributing to the slump in home prices. The median price of an existing home fell 15.4% to $181,800 from $215,000 in June 2008.

June is traditionally one of the best sales months of the year as families prepare to move before the start of the next school term, according to the NAR. The group adjusts the figures for these seasonal variations, however.

Home sales peaked in August 2005 at an annualized rate of more than 7.2 million. Sales have not topped the 5 million mark since last September.