With cash-paying investors on full retreat, existing home sales dropped 1.8% in August, according to the National Association of Realtors.
Sales increases in the Northeast and Midwest were outweighed by declines in the South and West, which are the two biggest housing markets.
Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell to a seasonally adjusted annual rate of 5.05 million in August from the already downwardly revised 5.14 million in July.
Sales are at the second-highest pace of 2014, but remain 5.3% below the 5.33 million-unit level from last August, which was also the second-highest sales level of 2013.
Lawrence Yun, NAR chief economist, says sales activity remains stronger than earlier in the year, but fell last month as investors stepped away.
"There was a marked decline in all-cash sales from investors,” he said. "On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”
Yun adds, "As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying.”
The median existing-home price for all housing types in August was $219,800, which is 4.8% above August 2013. This marks the 30th consecutive month of year-over-year price gains.
Total housing inventory at the end of August declined 1.7% to 2.31 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace. However, unsold inventory is 4.5% higher than a year ago, when there were 2.21 million existing homes available for sale.
All-cash sales were 23% of transactions in August, dropping for the second consecutive month (29% in July) and representing the lowest overall share since December 2009 (22%). Individual investors, who account for many cash sales, purchased 12% of homes in August, down from 16% last month and 17% in August 2013. Sixty-four percent of investors paid cash in August.
NAR President Steve Brown, co-owner of Irongate Realtors in Dayton, Ohio, says a gradual decline in investor activity, many who pay in cash, is good for the market and creates more opportunity for buyers who rely on financing to purchase a home.
"Realtors applaud the recent policy change to eliminate post-payment interest charges on FHA-insured single-family mortgages,” he said. "The prepayment penalty placed an unfair and unreasonable burden on consumers who already face high housing and closing costs.”
The percent share of first-time buyers remained unchanged in August from July at 29%. First-time buyers have represented less than 30% of all buyers in 16 of the past 17 months.
Distressed homes – foreclosures and short sales – represented 8% of August sales, remaining in the single-digits for the second straight month and down from 12% a year ago. Six percent of August sales were foreclosures and 2% were short sales. Foreclosures sold for an average discount of 14% below market value in August (20% in July), while short sales were discounted 10% (14% in July).
Properties typically stayed on the market in August longer (53 days) than last month (48 days) and a year ago (43 days). Short sales were on the market for a median of 135 days in August, while foreclosures sold in 53 days and non-distressed homes typically took 52 days. Forty percent of homes sold in August were on the market for less than a month.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage fell for the fourth consecutive month to 4.12% in August from 4.13% in July, and remains at the lowest rate since June 2013 (4.07%).
Single-family home sales slipped 1.8% to a seasonally adjusted annual rate of 4.46 million in August from 4.54 million in July, and are now 4.9% below the 4.69 million pace a year ago. The median existing single-family home price was $220,600 in August, up 5.2% from August 2013.
Existing condominium and co-op sales declined 1.7% to a seasonally adjusted annual rate of 590,000 units in August from 600,000 in July, and are now 7.8% below the 640,000 unit pace a year ago. The median existing condo price was $213,900 in August, which is 2.1% higher than a year ago.
Regionally, August existing home sales in the Northeast jumped 4.7% to an annual rate of 670,000, but remain 4.3% below a year ago. The median price in the Northeast was $265,800, which is 0.8% lower than a year ago.
In the Midwest, existing home sales increased 2.5% to an annual level of 1.24 million in August, but remain 3.9% below August 2013. The median price in the Midwest was $173,800, up 5.9% from a year ago.
Existing home sales in the South declined 4.2% to an annual rate of 2.03 million in August, and are now down 4.2% from August 2013. The median price in the South was $186,700, up 4.7% from a year ago.
Existing home sales in the West fell 5.1% to an annual rate of 1.11 million in August, and are 9.8% below a year ago. The median price in the West was $301,900, which is 5.4% above August 2013.