By Renae Merle
Washington Post Staff Writer
Friday, August 21, 2009 11:22 AM
Homes sales soared 7.2 percent in July, the largest monthly increase in a decade, and another potential sign that the housing market is on the mend.
The results were significantly stronger than analysts had expected and sent stocks up in early trading Friday. The Dow Jones industrial average climbed 1.5 percent, or 138 points, while the Standard & Poor's 500-stock index gained 1.6 percent, or 16 points. The tech-heavy Nasdaq was up 1.4 percent, or 27 points.
Sales of existing homes, including single-family homes and condos, jumped to an adjusted annual rate of 5.24 million units last month, according to the National Association of Realtors. That is up 5 percent from the same period last year -- the first year-over-year increase since November 2005.
"The housing market has decisively turned for the better," Lawrence Yun, the industry group's chief economist, said in a statement.
The sales increase was strongest in the Northeast and Midwest where it grew 13.4 percent and 10.9 percent, respectively. Sales dipped in the West, 1.7 percent, but were also up in the South, which includes the Washington area, climbing 7.1 percent.
There are still some signs of weakness in the market. The increase in sales came at the expense of home prices, which tumbled another 15 percent to $178,400 compared with the same period last year. And the housing inventory also grew 7.3 percent.
Economists have credited falling prices and an $8,000 tax credit for first-time home buyers for spurring sales in recent months. For the first time since June 2004, sales have increased for four consecutive months. But analysts have also warned that home prices are likely to continue to fall for some time and that another flood of foreclosed homes on the market could derail a recovery.