By Will Parker 

Home sales rose in August for the third consecutive month, fueled by robust demand for luxury homes and a pickup in Northeast sales that kept the housing market hot.

Sales of previously owned homes rose 2.4% from a month earlier to a seasonally adjusted annual rate of 6 million, the National Association of Realtors said Tuesday. That built on a 24.7% surge in July home sales, which was the strongest monthly gain ever recorded, going back to 1968.

Home buyers have returned in force since late spring, when lockdowns related to the coronavirus pandemic eased, open houses resumed and ultralow mortgage rates helped spur sales. With many Americans working from home, buyers are seeking more space and accelerating plans to leave crowded cities for the suburbs or for more rural areas, real estate agents say. Other home buyers have moved to live closer to family members.

Economists and housing experts expect sales to stay strong through the end of the year. The Federal Reserve has signaled it expects to hold rates near zero for at least three more years, and mortgage rates are also expected to stay low. Many companies have indicated that large numbers of Americans will continue working from home even after a coronavirus vaccine is developed, which could continue to boost home purchases.

"Sales volume could begin to taper in late 2020, but given current conditions, it's unlikely to diminish too much," said Matthew Speakman, economist at Zillow.

That is good news for the U.S. economy, which has struggled during the pandemic. The housing market has been one of the few signs of strength, and home sales can also help when consumers spend more on home goods and renovations.

On an annual basis, sales rose 10.5% in August, putting this summer's housing market well ahead of last year's sales levels. The boom in sales was most pronounced at the upper end of the market. Sales of homes priced at more than $1 million rose 44% nationally and were up 63.1% in the South.

"The luxury housing sector is just simply taking off," said Lawrence Yun, chief economist of NAR.

Larger and more expensive homes are in demand as wealthier buyers seek as much room as possible to work from home and in case their children have remote learning this school year. Because home prices have continued to rise during the pandemic, some existing homeowners are taking advantage by selling at a profit and putting the equity directly into bigger and more expensive houses, said Odeta Kushi, deputy chief economist at First American Financial Corporation.

Sales were strongest in the Northeast region during August, increasing 13.8%. That was followed by the Midwest, where total sales rose just 1.4%. The pickup in parts of the Northeast reflected pent-up buyer demand after pandemic-related restrictions began easing in some markets.

Mortgage rates are also near historic lows. As of Sept. 17, the average interest rate on a 30-year fixed rate mortgage was 2.87%, according to Freddie Mac.

The dearth of lower-cost homes available for sale continues to push up prices, making it difficult for first-time home buyers with more modest incomes to enter the market. The median sales price of an existing home in August was $310,600, 11.4% higher than in the same month last year.

The lower-priced part of the housing market didn't enjoy the same price gains. Sales of homes priced for less than $100,000 fell more than 20% compared with a year ago, according to NAR. And sales of homes priced $100,000 to $250,000 fell 8.9%. Inventory is shrinking for most price points, but this was especially a problem for lower-price homes. "The lower the price point the greater decline in inventory," Mr. Yun said.

As in July, homes sold at an unusually fast pace in August. The average number of days a home sat on the market before selling was 22, down from 31 a year ago.

News Corp., owner of The Wall Street Journal, operates under license from the National Association of Realtors.

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(END) Dow Jones Newswires

September 22, 2020 14:23 ET (18:23 GMT)

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