It Ain't All Big Hair and Cadillacs

Midwest home sales up in August despite national slide

By Lorene Yue
Sept. 27, 2007

(Crain’s) — More new Midwest homes sold in August compared to July, a striking contrast to the national trend where sales fell last month to the lowest level in seven years.

Roughly 135,000 new homes sold in the 12-state Midwest region, a 20.5% increase from July, according to figures released Thursday by the U.S. Department of Commerce. On a year-to-year comparison, Midwest sales are lagging last year by 11.2%.

Across the nation, sales fell 8.3% in August from July or a seasonally adjusted rate of 795,000 homes. That was the lowest national level since June 2000, when sales clocked in at a pace of 793,000.

Analysts chalked up the Midwest's fortune as a combination of aggressive discounting by homebuilders, a credit crunch that has had a greater negative impact on either coast and data anomaly.

"In a monthly number, I wouldn't put too much weight in it," said Diane Swonk, chief economist for Mesirow Financial. "It can be a quirk in the data."

Kevin Thorpe, manager of housing statistics for the National Association of Realtors, said the Midwest gain could be a bounce back from low July numbers. The Midwest posted a decline in July home sales from June while the rest of the nation saw increases.

The home sales report came on the same day that the government reported a relatively brisk business growth rate in revised figures for the second quarter. But the 3.8 percent pace was less than previously estimated and it occurred before the credit crisis and its repercussions across the broad spectrum of the economy had taken hold.

The national median sales price in August fell by 7.5 percent from a year earlier to $225,700.

That was the biggest drop in percentage terms in nearly 37 years. The median price is the middle point at which half sell for more and half for less. The average sales price dropped by 8 percent in August from a year earlier to $292,000. That was the biggest decline in 17 years.

Sales fell in the South and the West in August compared with July. Sales in the Northeast rose 43.2% in August from July.

The new-homes sales report, combined with other recent economic reports showing a sharp drop in demand for big-ticket manufactured goods in August, suggested the U.S. economy lost momentum as it headed into the fall.

On Wall Street, investors looked to the weak home sales report as justification for another rate cut by the Federal Reserve. The Dow Jones industrial average was up slightly in afternoon trading.

(Associated Press contributed to this story.)