Home Sales Soften on Inventory, Pricing Woes
September 22, 2016
Existing-home sales softened in August, the second consecutive month of declines despite mortgage rates hovering near record lows. Not enough homes for sale and higher home prices are curtailing sales, the National Association of REALTORS® reported Thursday. The Northeast – where inventory levels are more balanced – was the only region in the U.S. to see a bump up in closings in August.
Here is a closer look at how existing-home sales performed in your region of the country in August:
- Northeast: existing-home sales rose 6.1 percent to an annual rate of 700,000, unchanged from a year ago. Median price: $274,100 -- 0.8 percent higher than a year ago.
- Midwest: existing-home sales decreased 0.8 percent to an annual rate of 1.27 million in August, but are still 0.8 percent above a year ago. Median price: $190,700, up 5.5 percent from a year ago.
- South: existing-home sales dropped 2.7 percent to an annual rate of 2.16 million, but are still 0.9 percent above August 2015. Median price: $209,700, up 6.7 percent from a year ago.
- West: existing-home sales dropped 1.6 percent to an annual rate of 1.20 million in August, but are still 0.8 percent higher than a year ago. Median price: $347,400, which is 9.2 percent above a year ago.
“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 sidelines,” says Lawrence Yun, NAR’s chief economist. The 30-year fixed-rate mortgage averaged 3.44 percent in August, remaining at its lowest rate since January 2013, according to Freddie Mac.
Existing-home sales – which are completed transactions on single-family homes, townhomes, condos, and co-ops – dropped 0.9 percent in August to a seasonally adjusted annual rate of 5.33 million, according to NAR’s report. Sales are now at the second lowest pace of the year. Still, sales are 0.8 percent higher than a year ago, (when sales stood at 5.29 million).
“Healthy labor markets in most of the country should be creating a sustained demand for home purchases,” Yun says. “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.”
5 Key Indicators From August’s Report
Here are a few key housing numbers from NAR’s latest housing report:
1. Home prices: The median existing-home price for all housing types was $240,200 in August, up 5.1 percent from a year ago.
2. Days on the market: Forty-six percent of homes sold in less than a month in August. Properties stayed on the market for a median of 36 days last month, down from 47 days a year ago. Short sales tended to stay on the market the longest at a median of 144 days; foreclosures sold in 42 days; and non-distressed homes averaged 35 days.
3. All-cash sales: Twenty-two percent of all transactions were from all-cash sales in August, unchanged from a year ago. Individual investors account for the biggest bulk of cash sales. Individual investors purchased 13 percent of homes in August, up from 12 percent a year ago.
4. Distressed sales: Foreclosures and short sales comprised 5 percent of sales in August, the lowest since NAR began tracking such data in October 2008. A year ago, distressed sales made up 7 percent of sales. In August, 4 percent of sales were from foreclosures and 1 percent were short sales. Foreclosures tended to sell for an average discount of 12 percent below market value in August, while short sales were discounted 14 percent.
5. Inventories: Total housing inventory at the end of last month dropped 3.3 percent to 2.04 million existing homes available for sale. That represents a 10.1 percent decrease from a year ago, in which 2.27 million homes were available for sale. Unsold inventory is at a 4.6-month supply at the current sales pace.
“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,” Yun says. “While recent data from the U.S. 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 U.S. home ownership rate will remain near 50-year lows.”
Updated: August 16, 2019