As cash investors pull away from the housing market, August’s existing home sales also slipped, according to the National Association of REALTORS®. This decline follows four consecutive months of impressive gains. 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.
This drop was anticipated; Economists polled by MarketWatch had predicted an annual home-sales rate of 5.2 million in August, a drop from July’s original reported rate of 5.15 million.
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 says. “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 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.
NAR President Steve Brown, 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.
On the subject of mortgage financing, Brown adds, “REALTORS® applaud the recent policy change to eliminate post-payment interest charges on FHA-insured single-family mortgages,” he says. “The prepayment penalty placed an unfair and unreasonable burden on consumers who already face high housing and closing costs.”
However, not all markets are seeing drastic reductions. “Our August numbers produced $7.4 million in sales with the average sales price of $129,000” says James Watson, owner of Realty Executives Fort Leonard Wood in Fort Leonard Wood, Missouri. Fort Leonard Wood’s August 2014 sales numbers were just 3.4 percent lower than those in July of this year. “The absence of foreclosures takes some investors and low-budget buyers out of the marketplace, and news of force reductions make some buyers less motivated to invest,” explains Watson.
The percent share of first-time buyers remained unchanged in August from July at 29 percent. First-time buyers have represented less than 30 percent of all buyers in 16 of the past 17 months.
Distressed homes—foreclosures and short sales—represented 8 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 2 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.