Rise in existing home sales is likely a fluke

The sudden jump of existing home sales in the U.S. in August was probably a fluke, according to CNBC, and evidence suggests sales will decrease back to shaky levels next month.

Sales rose 7.7 percent month-over-month in August, but brokers say its largely because of delayed sales from the spring. The data reflects signings that may have taken place in May and June, before the global economic turmoil resurfaced in August.

And don’t look for the trend to continue. Consumer confidence has dipped, and the new conforming loan limit means fewer buyers will have access to financing. Also, sales contract cancellations have increased. In fact, 18 percent of realtors reported a cancelled contract, nearly five times the typical 4 percent rate.

“Given the recent sharp falls in equity prices and consumer confidence, there is a real risk that the 7.7 percent month over month rise in existing home sales in August will not be sustained,” says Paul Dales of Capital Economics.

And with distressed properties still comprising one-third of all sales, it’s also unlikely price will move upward anytime soon. [CNBC]