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US home sales pop—are the housing markets finally clearing?

By Tim Fernholz

When the housing bubble popped in 2008, the US was left with a glut of homes, many owned by people who found themselves carrying more mortgage debt than their homes were ultimately worth. Prices were slow to increase and the market failed to clear, despite low rates from the Federal Reserve designed to make new mortgages and refinancing more affordable. Last month, though, the Case-Shiller Housing Price index finally turned positive, year-over-year, across the country. And today, in news that surprised analysts, the National Association of Realtors in the US reported that existing home sales increased 7.8% in August, nearly four times what was expected. If prices are rising and existing homes are turning over—the housing inventory level is steadily declining—it may be that housing, a key sector in the US economy, may finally be starting to rebound.

(Chart via Calculated Risk)