July existing home sales pop 3.1%, but inventory rises
* Sales rose 3.1% to a seasonally adjusted annual rate of 5 million in July from 4.85 million in June (previously reported as 4.86 million). That was better than the average forecast of 4.91 million home sales. Sales were down 13.2% from the year-earlier reading of 5.76 million.
* Regionally, sales rose 5.9% in the Northeast from a month earlier. They also climbed 9.7% in the West and 0.9% in the Midwest. Sales were down 0.5% in the South. By property type, single-family sales were up 3.1% and condo sales were up 3.4%.
* The supply of homes for sale rose 3.9% to a record 4.669 million units in July from 4.495 million in June. Inventories were up from 4.561 million a year earlier. On a months supply at current sales pace basis, inventory climbed to 11.2 months from 11.1 months in June. That was also up from 9.5 months in July 2007 and ties April's cycle high.
* Median home prices fell 1.3% to $212,400 in July from $215,100 in June. They dropped 7.1% from $228,600 a year earlier.
There's a bit of good news/bad news in today's existing home sales report. On the one hand, the sales rate climbed 3.1%, a larger gain than was expected. We saw strength in both single-family and condo sales, with a noticeable increase out West. In fact, sales in the West region have risen five months in a row.
So what's the fly in the ointment? Inventories. The supply of homes on the market rose even faster than sales -- up 3.9% on the month to a record 4.67 million units. While investors and traditional buyers are starting to step up and buy in certain locations when lenders get aggressive enough on price, it's not enough. So many new foreclosed properties, short sales, and traditional homes for sale are hitting the market that it's overwhelming the decline in old inventory. As long as the economy and credit markets remain challenged, the housing market should continue to struggle and pricing should remain under pressure.