The number of homes sold in America fell in August as tough mortgage credit conditions dampened real estate activity.  American home sales fell 2.2 percent on the month and are almost eleven percent below last year’s sales.

Home sales rose in the Midwest and the South but fell elsewhere, says the National Association of Realtors.

According to NAR President Richard F. Gaylord, the pendulum in the mortgage market has swung too far.

“The difficulty in obtaining a mortgage increased over past couple of months, making it more challenging for creditworthy borrowers to find financing,” he said.

The average house price was $203,100 in August, down 9.5 percent from a year ago when it was $224,400.

“The average home price reflects more transactions related to subprime loans,” Lawrence Yun, NAR chief economist said. “Fewer than 10 percent of homeowners have subprime loans, but these mortgages are accounting for a disproportionately high share of sales in the current market. On the other hand, areas that have had sharp price cuts are seeing a turnaround in sales, which are rising very fast now in parts of California, Florida and Nevada.”

Regionally, the average price in the West fell by a worryingly high 23.9 percent from a year ago to $251,600. House sales fell 5.3 percent in August, but are 4.9 percent higher than August 2007. “The highest concentration of foreclosures is in the West, which is weighing down the average price because many buyers are taking advantage of deeply discounted prices,” Yun said.

House sales in the Midwest rose 0.9 percent in August compared to July but are 12.3 percent below sales volumes a year ago. The average price in the Midwest was $168,000, down 5.6 percent from last year.

In the South, house sales remained flat August, but are still 15.1 percent below a year ago. The average price in the South was $176,500, which is 3.4 percent lower than August 2007.

In the Northeast, house sales dropped 6.6 percent in August, and are 15.0 percent below a year ago. The average price in the Northeast was $271,000, down 3.8 percent from August 2007.

Yun does not believe property prices to stabilise until next year and expects only a modest gain of two or three percent in 2009. Some realtors believe even this modest expectation is more than they can realistically expect, given the current financial crisis.

Despite a variety of attempts by the Ben Bernanke, chief of the Federal Reserve, to encourage banks to lend more, America’s financial institutions have kept a tight rein on mortgage lending. The average interest rate on a typical 30-year American mortgage has been stuck above six percent for most of 2008.