Existing home sales dropped in August despite slowing price growth and a positive turnaround in the share of sales to first–time buyers, according to the National Association of Realtors.
This follows three months of consecutive gains. None of the four major regions experienced sales increases in August.
Total existing home sales, which are completed transactions that include single–family homes, townhomes, condominiums and co–ops, fell 4.8% to a seasonally adjusted annual rate of 5.31 million in August.
This is well below analyst expectations of 5.5 million, and down from a revised 5.58 million in July.
Lawrence Yun, NAR chief economist, says home sales in August lost some momentum to close out the summer.
“Sales activity was down in many parts of the country last month — especially in the South and West — as the persistent summer theme of tight inventory levels likely deterred some buyers," he said. "The good news for the housing market is that price appreciation the last two months has started to moderate from the unhealthier rate of growth seen earlier this year."
The median existing home price for all housing types in August was $228,700, which is 4.7% above August 2014, when it stood at $218,400. August's price increase marks the 42nd consecutive month of year–over–year gains.
“Home sales may have dipped below July’s high mark, but sales have still made healthy increases since August of last year —clearly showing housing is still on the rise despite the monthly fluctuations,” said Bill Banfield, vice president at Quicken Loans.
Total housing inventory at the end of August rose 1.3% to 2.29 million existing homes available for sale, but is 1.7% lower than a year ago (2.33 million). Unsold inventory is at a 5.2–month supply at the current sales pace, up from 4.9 months in July.
"With sales and overall demand higher than a year ago and supply mostly unchanged, low inventories will likely continue to limit options for those looking to buy this fall even with the overall pool of buyers shrinking because of seasonal factors," Yun said.
The percent share of first–time buyers rebounded to 32% in August, up from 28% in July and matching the highest share of the year set in May. A year ago, first–time buyers represented 29% of all buyers.
According to Freddie Mac, the average commitment rate for a 30–year, conventional, fixed–rate mortgage declined to 3.91% in August after climbing above 4% in July for the first time since November 2014.
"When the Federal Reserve decides to lift short–term rates — likely later this year — the impact on mortgage rates and overall housing demand will likely not be pronounced," Yun said. "With job growth holding steady, prospective buyers can handle any gradual rise in mortgage rates — especially if today's stronger labor market finally leads to a boost in wages and homebuilding accelerates to alleviate supply shortages and slow price growth in some markets."
NAR released a study earlier this month that examined new home construction in relation to job gains. The findings revealed that homebuilding activity is currently insufficient in a majority of metro areas and is contributing to the ongoing housing shortages and unhealthy price growth in many markets.
“This morning’s report on existing home sales reflect the impact of three outside forces in August on the housing market: (1) the anticipation over the Fed’s potential interest rate increase, (2) uncertainties abroad and (3) volatility in the financial markets,” said Selma Hepp, chief economist for Trulia. “Nonetheless, rapidly raising home prices and tight inventories still had the biggest impact on slowing the market in August.
“Overall, existing home sales fell, 4.8% from July, but were up 6.2% from August 2014,” Hepp says. “At 5.31 million seasonally adjusted, existing home sales still trend at 8-year highs. The sales activity still seems to be increasing in the higher price ranges, highlighting the bifurcation of housing markets - better performance of higher price segments and lack of activity in the lower price segments.”
One point she underscored was that at 32% in August, the share of first-time homebuyers continues to fluctuate and has not reached the historical average. She cited a recent Trulia survey that found that 72% millennials aged 18-34, who aspire to be homeowners, are holding off from buying until 2018 or later.
“Nationally, the lack of inventory continues to play a crucial role in the health of housing market – especially in the West. Over the last year, inventory is still tighter nationally,” Hepp said. “At 5.2 months’ supply, the number of for-sale homes on the market is 1.7% lower than this time last year and 1.3% higher than July. Regionally, home sales continue to grow at a higher rate in the West, but overall slowdown in price appreciation across the country should be encouraging for young buyers.”
Properties typically stayed on the market for 47 days in August, an increase from 42 days in July but below the 53 days in August 2014. Short sales were on the market the longest at a median of 124 days in August, while foreclosures sold in 66 days and non–distressed homes took 45 days. Forty percent of homes sold in August were on the market for less than a month.
All–cash sales decreased slightly to 22% of transactions in August (23% in July) and are down from 23% a year ago. Individual investors, who account for many cash sales, purchased 12% of homes in August, down from 13% in July and unchanged from a year ago. Sixty% of investors paid cash in August.
Matching the lowest share since NAR began tracking in October 2008, distressed sales — foreclosures and short sales — remained at 7% in August for the second consecutive month; they were 8% a year ago. Five% of August sales were foreclosures and 2% were short sales. Foreclosures sold for an average discount of 18% below market value in August (17% in July), while short sales were discounted 12% (unchanged from July).
Single–family home sales declined 5.3% to a seasonally adjusted annual rate of 4.69 million in August from 4.95 million in July, but are still 6.1% above the 4.42 million pace a year ago. The median existing single–family home price was $230,200 in August, up 5.1% from August 2014.
August existing home sales in the Northeast were at an annual rate of 700,000, unchanged from July and 6.1% above a year ago. The median price in the Northeast was $271,600, which is 2.4% above August 2014.
In the Midwest, existing home sales declined 1.5% to an annual rate of 1.28 million in August, but remain 5.8% above August 2014. The median price in the Midwest was $181,100, up 4.0% from a year ago.
Existing home sales in the South fell 6.6% to an annual rate of 2.14 million in August, but are still 5.9% above August 2014. The median price in the South was $196,300, up 6.0% from a year ago.
Existing home sales in the West dropped 7.8% to an annual rate of 1.19 million in August, but remain 7.2% above a year ago. The median price in the West was $321,300, which is 7.1% above August 2014.
Existing condominium and co–op sales declined 1.6% to a seasonally adjusted annual rate of 620,000 units in August from 630,000 units in July, but are still up 6.9% from August 2014 (580,000 units). The median existing condo price was $217,400 in August, which is 2.2% above a year ago.