Existing home sales in the United States unexpectedly slowed in August for the second consecutive month despite mortgage rates near record lows, the latest index data shows.
Higher home prices and not enough inventory for sale have kept some would-be buyers at bay, according to the index report from the National Association of Realtors. It also shows that only the Northeast region saw a monthly increase in closings in August, where inventory is currently more adequate.
Total existing home sales, which are completed transactions that include single family homes, town homes, condominiums and co-ops, fell by 0.9% to a seasonally adjusted annual rate of 5.33 million in August from a downwardly revised 5.38 million in July.
After the previous month’s decline, sales are at their second lowest pace of 2016, but are still slightly higher by 0.8% than a year ago when they were 5.29 million.
According to Lawrence Yun, NAR chief economist, recent job growth is not yielding higher home sales. ‘Healthy labour markets in most the country should be creating a sustained demand for home purchases,’ he said.
‘However, there’s no question that after peaking in June, sales in a majority of the country have inched backwards because inventory isn’t picking up to tame price growth and replace what’s being quickly sold,’ he explained.
‘Hopes of a meaningful sales breakthrough as a result of this summer’s historically low mortgage rates failed to materialize because supply and affordability restrictions continue to keep too many would-be buyers on the side lines,’ he added.
The index also shows that the median existing home price for all housing types in August was $240,200, up 5.1% from August 2015 and the 54th month in a row of year on year price gains.
However, total housing inventory at the end of August fell 3.3% to 2.04 million existing homes available for sale and is now 10.1% lower than a year ago and has declined year-over-year for 15 straight months. Unsold inventory is at a 4.6 month supply at the current sales pace, which is down from 4.7 months in July.
The share of first time buyers was 31% in August, which is down from 32% both in July and a year ago. First time buyers represented 30% of sales in all of 2015.
‘It’s very concerning to see that inventory conditions not only show no signs of improving but have actually worsened in recent months from their already suppressed levels a year ago,’ said Yun.
‘While recent data from the US Census Bureau shows that household incomes rose strongly last year, home prices are still outpacing incomes in many metro areas because of the persistent shortage of new and existing homes for sale. Without more supply the US home ownership rate will remain near 50 year lows,’ he pointed out.
Properties typically stayed on the market for 36 days in August, unchanged from July and down considerably from a year ago when it was 47 days. Short sales were on the market the longest at a median of 144 days in August, while foreclosures sold in 42 days and non-distressed homes took 35 days and 46% of homes sold in August were on the market for less than a month.
‘Given the inventory shortages in most markets, new listings at affordable prices are receiving multiple offers and going under contract almost immediately upon becoming available,’ said NAR president Tom Salomone.
All-cash sales were 22% of transactions in August, up from 21% in July and unchanged from a year ago. Individual investors, who account for many cash sales, purchased 13% of homes in August, up from 11% in July and 12% a year ago. Some 62% of investors paid in cash in August.
Distressed sales, that is foreclosures and short sales, were 5% of sales in August, the lowest since NAR began tracking in October 2008, unchanged from the previous month and down from 7% a year ago.
Some 4% of August sales were foreclosures and 1% were short sales. Foreclosures sold for an average discount of 12% below market value compared to 18% in July, while short sales were discounted 14% compared to 16% in July.
Single family home sales declined 2.3% to a seasonally adjusted annual rate of 4.7 million in August from 4.81 million in July but are still 0.6% above the 4.67 million pace a year ago. The median existing single family home price was $242,200 in August, up 5.3% from August 2015.
Existing condominium and co-op sales increased by 10.5% to a seasonally adjusted annual rate of 630,000 units in August from 570,000 in July and are now 1.6% above August 2015. The median existing condo price was $225,100 in August, which is 3.7% above a year ago.
A regional breakdown shows that existing home sales in the Northeast rose 6.1% to an annual rate of 700,000 and is unchanged from a year ago. The median price in the Northeast was $274,100, which is 0.8% above August 2015.
In the Midwest existing home sales fell 0.8% to an annual rate of 1.27 million in August but are still 0.8% above a year ago. The median price in the Midwest was $190,700, up 5.5% from a year ago.
Existing home sales in the South fell 2.7% to an annual rate of 2.16 million but are still 0.9% above August 2015. The median price in the South was $209,700, up 6.7% from a year ago.
Existing home sales in the West fell by 1.6% to an annual rate of 1.2 million in August but are still 0.8% higher than a year ago. The median price in the West was $347,400 which is 9.2% above August 2015.
