WASHINGTON (9/23/14)--Weak demand from investors caused home sales to decelerate in August, according to a National Association of Realtors (NAR) report published Monday.
The seasonally adjusted annualized rate of existing-home sales dropped to 5.05 million for the month, down from 5.14 million in July and 5.33 million on a year-over-year basis. The decrease, 1.8% on a monthly basis and 5.3% on a year-over-year basis, was driven by a declining overall share of investor purchases, to 12% from 16%--the lowest level since late 2009, according to The Wall Street Journal (Sept. 22).
All-cash sales, which are often made by investors, constituted 23% of all sales in August, down from 29% in July. In August, 64% of investors bought existing homes with cash.
Sales of existing single-family homes were down to 4.46 million in August, a 1.8% decrease on a monthly basis and a 4.9% decrease on an annual basis. Condominium and co-op sales were down by a 1.7% monthly basis to 590,000--a 7.8% decrease over the previous 12 months.
Monthly increases of existing home sales in the Northeast and Midwest--by 4.7% and 2.5%--couldn't make up for declining monthly sales of 4.2% and 5.1% in the South and West, respectively. In every census region, sales fell by a year-over-year basis.
The cooling demand and its geographic disparity and the declining volume of investor purchases are being caused by a decline in the market supply of foreclosed homes (Economy.com Sept. 22).
Moody's analysts said, however, that stronger job growth and higher household income should lead to more robust demand in the near future from first-time homebuyers. NAR Chief Economist Lawrence Yun also told The Wall Street Journal that he believes there is "sizeable pent-up demand" in the market.
Inventory is also dropping in the short-term. The inventory of single-family homes fell to 2.31 million--a 1.7% monthly decrease--but it still is experiencing an overall 4.5% annual increase.
At the current rate of demand, it would take 5.5 months to deplete the supply of existing single-family homes for sale and 5.3 months to deplete the supply of co-op housing and condominiums on the market. The so-called inventory-to-sales ratio for single-family homes remained the same between July and August and increased by a half-month on an annual basis. The same measure for co-ops and condominiums was down by 0.3 months on a monthly basis and 0.7 months on a year-over-year basis.
Despite the year-over-year decline, Moody's analysts remain bullish. They pointed out that home sales have risen consistently over the past six months. The median sales price for a home in August was up 4.8% on an annual basis, to $219,000.
Builders, too, remain the most optimistic they have been since late 2005, according to a report published last week by the National Association of Home Builders.