NAR: 'Existing-Home Sales Rise to Second Highest on Record'

The National Association of Realtors reported that "Existing-home sales rose in August to the second-highest pace on record." Not only that but there were "strong price gains in a market of tight supply."

Total existing-home sales including single-family, townhomes, condominiums and co-ops increased 2.0 percent in August to a seasonally adjusted annual rate1 of 7.29 million from a pace of 7.15 million in July. Sales were 7.8 percent higher than the 6.76 million-unit pace in August 2004; the record was 7.35 million in June of this year.

Lots of homes selling. Impressive. Big picture looks all rosy?

Total housing inventory levels rose 3.5 percent at the end of August to 2.86 million existing homes available for sale, which represents a 4.7-month supply at the current sales pace. Historically, a supply of around six months is reflective of a market in balance between home buyers and sellers.

Inventory is rising. A 3.5% rise in inventory for one month is significant. I fully expect that the August number we will see a even larger percentage rise in inventory.

David Lereah, NAR's chief economist, said the fundamental factors for housing remain positive. With a general background of growing population and favorable affordability conditions, home sales are staying at very healthy levels he said. Housing inventory improved in August but remains tight, and we have some way to go before we get into a range of balance between home buyers and sellers. As a result, we wil continue to see above-normal home price appreciation for the foreseeable future

David Lereah is admitting to rising inventory. He sees "favorable affordability conditions." Sure, Souix Falls, SD has 'favorable affordability,' but San Diego, LA, Bakerfield, Miami, Boston, NYC, and Phoenix are experiencing a historic lack of affordability.

• Region, Median Price of Existing Home, Median Home Price Appreciation Year over Year
• Northeast---254K---16.5%
• Midwest----176K----11.4%
• South-------189K----9.9%
• West--------322K---20.1%

Mean Sales Price for Existing Homes price by region.

• Region, Mean Price of Existing Home, Mean Home Price Appreciation Year over Year
• Northeast---288K--12.1%
• Midwest----208K---7.8%
• South-------242K---10%
• West--------357K--14.4%

Notice, how the percentage increase is significantly lower for the mean then the median home price. Why? Please post your theories.