Home sales fall after 4 months of increases

Home resales dipped unexpectedly last month, falling 2.7 percent from a month earlier, the National Association of Realtors said yesterday. That reversed steady monthly gains since April, but most economists called the drop temporary and said they expected sales to strengthen this fall.

"It doesn't change the underlying trend of improvement," said Dean Maki, chief U.S. economist at Barclays Capital.

Laura Lafayette, CEO of the Richmond Association of Realtors, said the local resale market mirrored the national market.

"We were making progress, with increases in May, June and July, but then it dipped in August," she said.

Year-to-date sales in the area are tracking 14 percent lower from last year, Lafayette said. She believes the Richmond market will bounce back later than the national market.

"We were slow getting in, we'll be slow getting out," she said.

Even if national sales do turn upward again, Maki and other economists don't expect prices to follow. Though prices stabilized this summer, many economists are forecasting a downward turn over the fall and winter. They expect prices to finally hit bottom early next year.

Raymond T. Brastow, a financial economist at the Richmond Federal Reserve and professor of economics at Longwood University, said the August drop "might be an indicator that the economic recovery will be slow and uneven."

Despite the setback, Brastow believes the are indications the market is bouncing back.

"The housing market is beginning to show signs of life," he said.

Compared with a year ago, home sales are up 3.4 percent, and the inventory of unsold homes has been whittled down to an 8½-month supply at the current sales pace. That's the lowest level in more than two years.

Fewer foreclosures have been coming on to the market in Phoenix, for example, cutting the number of homes for sale from about 54,000 last year to about 31,000 today, said Floyd Scott, broker-owner of Century 21 Arizona-Foothills.

Sales this month should be ahead of August levels, Scott says. But he wonders whether they will drop after the Nov. 30 sunset of a tax credit of up to $8,000 for first-time homebuyers.

"It will be interesting to see what happens sometime around the first or second week of October," he said.

In Washington, real estate agents and home builders are lobbying hard for an extension of the credit. Without it, they argue, the housing market will take a sharp turn for the worse.

First-time buyers purchased almost one in three homes in August. Together with investors snapping up foreclosures, they have provided most of the momentum in the market this year.

"Prices have just gotten so low in some places that investors can't resist," said Dave Denslow, an economics professor at the University of Florida.

Times-Dispatch staff writer Louis Llovio and The Associated Press contributed to this report.