August Existing Home Sales Post 1.3% Increase

August existing home sales rose to their highest pace in more than a year, the National Association of Realtors reported yesterday.

NAR said total existing home rose by 1.3% from July to a seasonally adjusted annual rate of 5.49 million, the second consecutive monthly increase. Sales improved by 2.6% from a year ago (5.35 million). Single-family home sales rose slightly to a seasonally adjusted annual rate of 4.90 million in August, up from 4.84 million in July and up 2.9% from a year ago. The median existing single-family home price was $280,700 in August, up 4.7% from a year ago.

The report said existing condominium and co-op sales rose to a seasonally adjusted annual rate of 590,000 units in August, 1.7% above the rate from July and unchanged from a year ago. The median existing condo price was $257,600 in August, which is up 5.2% from a year ago.

Regionally, sales rose in the Northeast, Midwest and South, but fell slightly in the West. From a year ago, August sales increased in each of the four major regions. Median home prices rose from a year ago, except in the Northeast, with the Midwest showing the highest price increase.

Sales in the Northeast increased by 7.6% to an annual rate of 710,000, a 1.4% increase from a year ago. The median price in the Northeast fell to $303,500, down 0.3% from a year ago. In the Midwest, sales rose by 3.1% to an annual rate of 1.31 million, a 2.3% increase from a year ago. The median price in the Midwest rose to $220,000, a 6.6% jump from a year ago.

Sales in the South increased by 0.9% to an annual rate of 2.33 million in August, up 3.6% from a year ago. The median price in the South rose to $240,300, up 5.4% from a year ago. Sales in the West declined by 3.4% to an annual rate of 1.14 million in August, 1.8% above a year ago. The median price in the West rose to $415,900, up 5.7% from a year ago.

“The underlying strength seen in various housing indicators was reinforced in today’s release of August existing-home sales,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting with the Mortgage Bankers Association. “Even with some of the economic and financial market uncertainty, housing demand, particularly from younger first-time homebuyers, is being fueled by faster wage growth and low mortgage rates.”

Kan noted so far in 2019, only two months that exceeded 2018’s sales pace. “This is counter to MBA data on the annual changes in purchase mortgage applications, which have been higher for most of the year,” he said. “The lower share of buyers paying in cash, along with the increase in first-time buyers–who are more likely to finance their purchase with a mortgage–continues to add to this divergence in the two measures.”

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said lower mortgage rates are enticing buyers back to the market. “This rise in sales, along with higher selling prices and [Wednesday’s] above-consensus housing starts, mean residential investment will finally add to overall GDP growth, boosting prospects for the third quarter,” he said.

NAR Chief Economist Lawrence Yun also attributed the increase in sales to falling mortgage rates. “As expected, buyers are finding it hard to resist the current rates,” he said. “The desire to take advantage of these promising conditions is leading more buyers to the market.”

NAR reported the median existing home price for all housing types in August was $278,200, up 4.7% from August 2018 ($265,600). August’s price increase marks the 90th straight month of year-over-year gains.

“Sales are up, but inventory numbers remain low and are thereby pushing up home prices,” Yun said. “Homebuilders need to ramp up new housing, as the failure to increase construction will put home prices in danger of increasing at a faster pace than income.”

Total housing inventory at the end of August decreased to 1.86 million, down from 1.90 million homes available for sale in July, and marking a 2.6% decrease from 1.91 million one year ago. Unsold inventory is at a 4.1-month supply at the current sales pace, down from 4.2 months in July and from the 4.3-month figure recorded in August 2018.

The report said properties typically remained on the market for 31 days in August, up from 29 days in July and a year ago. Forty-nine percent of homes sold in August were on the market for less than a month. First-time buyers were responsible for 31% of sales in August, down from 32% in July and unchanged from a year ago.

NAR said as the share of first-time buyers rose, individual investors or second-home buyers purchased 14% of homes in August, up from 11% in July and from 13% a year ago. All-cash sales accounted for 19% of transactions in August, unchanged from July and down from 20a year ago). Distressed sales represented 2% of sales in August, unchanged from July, but down from 3% in August 2018.