After four consecutive months of gains, existing-home sales slipped in August as investors paying in cash retreated from the market, according to the National Association of Realtors (NAR). Sales increases in the Northeast and Midwest were outweighed by declines in the South and West. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August from a slight downwardly-revised 5.14 million in July. Sales are at the second-highest pace of 2014, but remain 5.3 percent below the 5.33 million-unit level from last August, which was also the second-highest sales level of 2013.
“There was a marked decline in all-cash sales from investors,” said Lawrence Yun, NAR chief economist. “On the positive side, first-time homebuyers 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. 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 percent 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 percent 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 percent higher than a year ago, when there were 2.21 million existing homes available for sale.
All-cash sales were 23 percent of transactions in August, dropping for the second consecutive month (29 percent in July) and representing the lowest overall share since December 2009 (22 percent). Individual investors, who account for many cash sales, purchased 12 percent of homes in August, down from 16 percent last month and 17 percent in August 2013. Sixty-four percent of investors paid cash in August.
“Realtors applaud the recent policy change to eliminate post-payment interest charges on FHA-insured single-family mortgages,” said NAR President Steve Brown, co-owner of Irongate Inc., Realtors in Dayton, Ohio. “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 homebuyers remained unchanged in August from July at 29 percent. First-time homebuyers have represented less than 30 percent of all buyers in 16 of the past 17 months.
Distressed homes—foreclosures and short sales—represented eight percent of August sales, remaining in the single-digits for the second straight month and down from 12 percent a year ago. Six percent of August sales were foreclosures and two percent were short sales. Foreclosures sold for an average discount of 14 percent below market value in August (20 percent in July), while short sales were discounted 10 percent (14 percent 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 percent in August from 4.13 percent in July, and remains at the lowest rate since June 2013 (4.07 percent).
Single-family home sales slipped 1.8 percent to a seasonally adjusted annual rate of 4.46 million in August from 4.54 million in July, and are now 4.9 percent below the 4.69 million pace a year ago. The median existing single-family home price was $220,600 in August, up 5.2 percent from August 2013.
Existing condominium and co-op sales declined 1.7 percent to a seasonally adjusted annual rate of 590,000 units in August from 600,000 in July, and are now 7.8 percent below the 640,000 unit pace a year ago. The median existing condo price was $213,900 in August, which is 2.1 percent higher than a year ago.
Regionally, August existing-home sales in the Northeast jumped 4.7 percent to an annual rate of 670,000, but remain 4.3 percent below a year ago. The median price in the Northeast was $265,800, which is 0.8 percent lower than a year ago.
In the Midwest, existing-home sales increased 2.5 percent to an annual level of 1.24 million in August, but remain 3.9 percent below August 2013. The median price in the Midwest was $173,800, up 5.9 percent from a year ago.
Existing-home sales in the South declined 4.2 percent to an annual rate of 2.03 million in August, and are now down 4.2 percent from August 2013. The median price in the South was $186,700, up 4.7 percent from a year ago.
Existing-home sales in the West fell 5.1 percent to an annual rate of 1.11 million in August, and are 9.8 percent below a year ago. The median price in the West was $301,900, which is 5.4 percent above August 2013.
“A drop in home sales is discouraging as economists were expecting a meager increase to end the summer. The silver lining in this report is the drop in all-cash investor activity," said Quicken Loans vice president Bill Banfield. "The hope going forward is the opportunity for families to have less competition with investors leaving them with more buying power when they look to put down their roots.”