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On a year-over-year basis, existing home sales are 18.6 percent higher than the 4.24 million unit level in August 2010, courtesy of strong gains in the second half of 2010.

Existing home sales turned up in August, with month-over-month gains across all regions. National Association of Realtors reported sales of existing homes rose 7.7 percent in August, to 5.03 million. This follows a period of decline, wherein existing home sales contracted 13.5 percent between January and July.

Gains were observed for both housing types and across all regions last month. Single-family home sales increased 8.5 percent to 4.47 million units, and condominium and co-op sales inched up 1.8 percent to 560,000 units.

Across the regions, the West experienced a very strong rise, up 18.3 percent to an annual pace of 1.23 million units, more than recovering from the 12.6 percent decline registered in the previous month. Improvements were more modest elsewhere; increasing 5.4 percent in the South to 1.94 million, rising 3.8 percent in the Midwest to 1.09 million units and up 2.7 percent to 770,000 units in the Northeast.

The increase in home sales for August relates in part to an increase in purchases by investors, with investors’ share of sales jumping to 22 percent in August from 18 percent in July. The NAR notes, “Investors were more active in absorbing foreclosed properties. In addition to bargain hunting, some investors are in the market to hedge against higher inflation.”

Purchases by investors have greatly influenced the level of existing home sales over the past year. As the chart below shows, total sales have typically moved in line with changes in investors’ share of home sales.

With house prices no longer falling, and the situation in the rental market firming in recent months, conditions are well suited to investors. Expect steady improvement in existing home sales over the remainder of the year and into 2012, which will be driven in part by further increases in investors’ share of existing home sales.

– Courtesy of NAHB