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Home sales jump in August: why it's not enough to revive housing market

Even as home sales increased in August, median prices fell. Experts point to a 'shadow inventory' of homes that will eventually face foreclosure and say prices won't keep up with inflation for years.

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Sales of previously owned US homes rose more than anticipated in August as investors used cash to buy distressed properties.
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Americans bought nearly 8 percent more homes in August than in July, a welcome sign of progress for the still-troubled US housing market.

For the first time since April, sales of previously owned homes rose to an annualized rate of more than 5 million per year. The median sales price was $168,300, down from $177,300 a year before, the National Association of Realtors reported Wednesday.

Despite the gains in sales volume, unsold inventory fell only slightly, to 3.6 million units for sale. And housing market experts say the additional "shadow inventory" remains large, including homes held by delinquent borrowers who will eventually face foreclosure.

The problem is reflected in a new forecast that US home prices, on average, will not keep pace with inflation over the next four years. Home prices are likely to post nominal gains of about 1 percent a year through 2015, according to a MacroMarkets poll of a diverse group of 111 economists and real estate experts.

By comparison, the Federal Reserve expects inflation to run as much as 2 percent a year over that time.

Robert Shiller, the founder of MacroMarkets and a Yale University economist, said the outlook among forecasters has dimmed somewhat in recent months.

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