July existing home sales up 3.1 pct to 5.0 mln rate vs 4.94 mln expected UPDATE

(updates additional details and analysts' commentary)

WASHINGTON (Thomson Financial) - Sales of previously owned homes in the US rose more than expected in July, while inventories reached a record high, the National Association of Realtors said today in a report economists say provides a mixed picture of the housing market.

According to NAR, sales rose 3.1% to an annual rate of 5.00 mln units, up from a downwardly revised 4.85 mln unit pace in June. Economists polled by Thomson Reuters IFR Markets were expecting a smaller increase in the pace of home sales, to 4.94 mln units. The annual rate in July is 13.2% lower than the pace set a year earlier.

'The slight increase in the headline will provide some support to claims of a bottom in the market forming,' Joseph Brusuelas of MFR said. 'However, the fact that 40% of sales activity came from banks selling foreclosed homes tends to suggest that absent a fire sale in the housing sector, we have some ways to go before things truly stabilize.'

'More troubling was the continued increase in inventories,' he said. Inventories of existing homes, which includes both single family homes and condominiums, rose 3.9% in July to 4.67 mln units. That's a record high level, and at the current sales pace, it would take 11.2 months to exhaust the supply of homes on the market.

That ties the months supply record set in April, NAR said.

Single family homes sales rose 3.1% in July, due in part to a 7.7% drop in single family home prices, and inventory levels fell slightly.

Condo sales rose 3.4%, while prices fell 2.7% and inventories rose sharply. NAR said the overall record high inventory level was due to the sharp rise in condo inventories, which now sit at a record high 15.1 months supply. The number of condos on the market in July jumped to 769,000 units, from 595,000 units in June. That is a 29.2% increase in condo inventories in just one month.

'Inventory remains high in many parts of the country and will require time to fully absorb,' NAR Chief Economist Lawrence Yun said. 'We expect more balanced conditions in 2009 and will eventually return to normal long-term appreciation patterns.'

But Joshua Shapiro of MFR said inventories would probably be higher 'if all those wishing to sell their home actually had the house on the market instead of pulling it off in the face of weak demand and eroding prices.' He also noted homes still tied up in foreclosure and those purchased in bulk out of foreclosures that have yet to hit the market.

The median home sales price is down 7.1% over the past year, and now sits at $212,400. That's the first drop in median home sales price in five months. Home prices are up 8.6% from $195,600, which was the low point in the cycle in February.

Sales rose in three regions of the country, but fell 0.5% in the South. Sales rose 9.7% in the West, 5.9% in the Northeast, and 0.9% in the Midwest. Bob Brusca of FAO Economics says the regional displays suggest that the Northeast is showing a 'tentative sign of bottoming and rebounding' while the West is 'showing a nice, clear but slow upswing in progress.'

'You can make a case that the housing sector is in correction in a positive way based on today's report,' Brusca said. Still, 'housing is not out of the woods' as there is still lingering questions over whether the economy will weaken further and undermine progress in the sector. [e-mail][e-mail][e-mail][e-mail], [e-mail] pik/tlm/wash/slj COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.