Existing home sales (completed transactions) fell in August, according to the National Association of Realtors (NAR) which points to a significant drop in all-cash sales by investors as the culprit.
After four months in a row of improving sales numbers, investors pulling out of the market is disappointing, but sales activity was uneven nationally, with a spike in the Midwest and Northeast, pulled down by declines in the West and South.
Total existing home sales dropped 1.8 percent in August, and 5.3 percent from August 2013, but are at the second highest pace of the year.
The silver lining
Dr. Lawrence Yun, NAR chief economist notes, “There was a marked decline in all-cash sales from investors. 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.”
Dr. 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.”
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.
Regarding mortgage financing, Brown adds, “Realtors applaud the recent policy change to eliminate post-payment interest charges on FHA-insured single-family mortgages. The prepayment penalty placed an unfair and unreasonable burden on consumers who already face high housing and closing costs.”
More highlights from NAR’s report
In August, NAR reports the following:
- The median existing home price was $219,800 (4.8 percent above August 2013).
- Housing inventory dipped 1.7 percent, with a 5.5-month supply (4.5 percent above August 2013).
- All-cash sales were 23 percent of all transactions (lowest share since December 2009).
- Individual investors accounted for 12 percent of homes purchased (down from 17 percent in August 2013).
- First-time buyers remain unchanged at 29 percent of purchases in August.
- Distressed homes accounted for eight percent of sales (down from 12 percent in August 2013).
- Foreclosures represented six percent, and short sales two percent of sales in August.
- Average days on market hit 53 (up from 48 days in July, 43 in August 2013).
- Short sales were on the market for a median of 135 days.
- Foreclosures sat on the market for a median of 53 days, non-distressed homes sold in 52.
- Fully 40 percent of homes listed sold in under 30 days.
Regional performance varied
In August, existing home sales:
- Rose in the Northeast 4.7 percent, but remain 4.3 percent below a year ago. The median price was $265,800, 0.8 percent lower than a year ago.
- Rose in the Midwest 2.5 percent, 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.
- Fell 4.2 percent, 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.
- Fell 5.1 percent in the West, 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.