Existing home sales bounce back in August

NEW YORK (CNNMoney.com) -- Existing home sales bounced back in August after plunging nearly 30% in the previous month.

Sales of previously-owned homes rose 7.6% to a seasonally adjusted annual rate of 4.13 million units last month, the National Association of Realtors reported Thursday. That's up from 3.84 million in July, but down 19% from a year ago.

Analysts had expected sales to edge up to an annual rate of 4.10 million units, according to consensus estimates from Briefing.com.

The gain in August was a welcome change after last month's dismal report, which showed that home sales sank 27% to the lowest level.

"I would call August's number less toxic -- it wasn't pretty but it wasn't the ugliest," said Mark Tepper, managing partner of Strategic Wealth Partners. "We're still down 21.5% from June and sales dropped significantly in July, so the hurdle was just so low that you almost had to beat it."

And a single upbeat reading doesn't mean a recovery in the housing market has taken hold, said Lawrence Yun, NAR chief economist.

"Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty," said Yun.

Inventory and prices: After steadily rising in previous months, the inventory of homes on the market edged down 0.6% in August to 3.98 million units.

But that's enough supply to last 11.6 months. To hit a balance between supply and demand, inventory should only last 4.5 to 6 months, said Tepper.

Such swollen inventory levels will continue to pressure home prices, he cautioned.

The median price of homes sold in August was $178,600, down 1.9% from the previous month and up a slight 0.8% from a year ago, the report showed. About a third of homes sold during the month were in foreclosure.

"Home values have shown stabilizing trends over the past year, even as the economy shed millions of jobs, because of the home buyer tax credit stimulus," said Yun. "Now that the economy is adding some jobs, the housing market needs to steadily improve and eventually stand on its own."

What does this mean for home-buyers and sellers?

"If you're a homebuyer, sell now if you can," said Tepper. "If you're looking to buy, wait a while."

That's because prices are likely to sink another 10% to 25% in the next 18 to 24 months as the economic recovery remains sluggish, said Tepper.

"This whole housing mess is a disaster that's going to last a while," he said.

Sales by property and region: Sales of single-family homes rose 7.4% in August compared to the prior month, but were down 19.2% from a year ago, while condominium and co-op sales jumped 8.5% in the month.

Regionally, the West fared the best last month, with sales soaring 13.8%. Sales in the Midwest, the Northeast and the South all rose at least 5%.