August Housing Data Raises Eyebrows

Following three straight months of gains, existing–home sales dipped in August despite slowing price growth and a positive turnaround in the share of sales to first–time buyers, according to theNational Association of Realtors®.

Total existing–home sales fell 4.8 percent to a seasonally adjusted annual rate of 5.31 million in August from a slight downward revision of 5.58 million in July. Despite last month’s decline, sales have risen year–over–year for 11 consecutive months and are 6.2 percent above a year ago (5.00 million).

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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 percent above August 2014 ($218,400). August’s price increase marks the 42nd consecutive month of year–over–year gains.

That is good news for home sellers, but many of those sellers will also be buyers once they sell and inventory issues continue to plague the housing market.

Total housing inventory at the end of August rose 1.3 percent to 2.29 million existing homes available for sale, but is 1.7 percent lower than a year ago (2.33 million).

“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,” adds Yun.

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The inability to create sufficient inventory continues to dog the US housing market. Perhaps homebuilders are simply cautious after their experience during the Great Recession? More likely is that the US simply lacks the skilled workforce required to build the new housing units needed to meet demand.

It may be a combination of both lack of skilled labor and hesitant home builders.

The percent share of first–time buyers rebounded to 32 percent in August, up from 28 percent in July and matching the highest share of the year set in May. This time last year first–time buyers represented 29 percent of all buyers.

That is good news. The housing market needs Millennials to end their hesitancy to buy and it also needs Boomers who got burned during the Great Recession to re-enter the market.

Technically, homebuyers that have been out the market for more than 3 years are considered first-time buyers again. That means the rebound buyers, or “boomerang buyers” as they are sometimes called, affect the first-time buyer statistics.

The other good news is that homeowners who purchased just before the crash likely now have homes at or above their purchase price. Home prices in July were 5.3 percent higher than July of 2014 and are now just 5.5 percent below their peak from June of 2006.

After rising through most of the spring, mortgage rates came down slightly in August. While great mortgage rates help the issue plaguing many markets, affordability, they continue to be offset by price increases due to lack of inventory.

Other factors weighing on the market include the potential for higher rates, but also an inept government.

“The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being,”  Yun stated in a release.

“Furthermore, adapting to the changes being implemented next month in the mortgage closing process could delay some sales.”

The ineptitude of Congress is almost not newsworthy at this point. That said, the looming changes to mortgage disclosure rules, while needed and likely helpful to consumers, could cause some slowdown in how mortgages will close.

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Regional Breakdown

No region offers great news for existing home sales, unless you are a potential seller.

August existing–home sales in the Northeast were at an annual rate of 700,000, unchanged from July and 6.1 percent above a year ago. The median price in the Northeast was $271,600, which is 2.4 percent above August 2014.

In the Midwest, existing–home sales declined 1.5 percent to an annual rate of 1.28 million in August, but remain 5.8 percent above August 2014. The median price in the Midwest was $181,100, up 4.0 percent from a year ago.

Existing–home sales in the South fell 6.6 percent to an annual rate of 2.14 million in August, but are still 5.9 percent above August 2014. The median price in the South was $196,300, up 6.0 percent from a year ago.

Existing–home sales in the West dropped 7.8 percent to an annual rate of 1.19 million in August, but remain 7.2 percent above a year ago. The median price in the West was $321,300, which is 7.1 percent above August 2014.

These numbers make it pretty clear that inventory – not the overall housing market – is the biggest issue. Every region saw a decline in home sales, but also saw home price increases.
If you are planning on selling you should see opportunity in those numbers.

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