WASHINGTON – Fewer Americans bought homes in August, as investors retreated from real estate and first-time buyers remained scarce.
Sales of existing homes fell 1.8 per cent to a seasonally adjusted annual rate of 5.05 million, the National Association of Realtors said Monday. That snaps a four-month streak of gains. August sales are down from a July rate of 5.14 million, a figure that was revised slightly downward.
Much of the decline came from the exodus of investors, who had been buying properties in the aftermath of the housing bust and recession. Investors accounted for just 12 per cent of August purchases, compared to 17 per cent a year earlier.
Overall, the pace of home sales has dropped 5.3 per cent year-over-year.
The rebound from the housing bust that triggered the recession has been painfully slow. The share of Americans who own homes has trended downward over the course of the five year recovery, as more Americans are becoming renters. The ownership rate fell to 64.7 per cent through the middle of this year, down from a peak of 69.2 per cent toward the end of 2004, according to the Census Bureau.
Sales were curbed by winter storms earlier in the year. They began to accelerate through the summer as mortgage rates eased back from 52-week highs. But the combination of rising home prices last year and sluggish wage growth has limited sales.
Rising prices through much of 2013 and weak income growth priced out many would-be buyers. Only 29 per cent of purchases in August came from first-time buyers, well below the historical average of 40 per cent.
The median sales price has risen 4.8 per cent over the past 12 months to $219,800, but it slipped slightly in August compared to prices in July and June.
Sales of existing homes continue to lag last year’s pace of 5.1 million. Annual sales of 5.5 million are consistent with a healthy housing market, according to analysts.
Many consider home sales to be the missing link in a solid economic recovery. Federal Reserve Chair Janet Yellen recently told Congress that housing has proven to be disappointing this year.
Indicators heading into the fall and winter are mixed for real estate, however.
Home construction plunged 14.4 per cent in August compared with the prior month, the Commerce Department said Thursday. Much of that decline was due to a drop-off in building apartment complexes, but single-family home construction also fell 2.4 per cent.
Applications for building permits, a sign of future activity, dipped 5.6 per cent to an annual rate of 998,000.
Yet builders expressed more confidence. The sentiment index from the National Association of Home Builders and Wells Fargo climbed in September to 59, the highest reading since November 2005. Readings above 50 indicate more builders view sales conditions as good rather than poor.
New-home construction increased 15.7 per cent in July to a seasonally adjusted annual rate of 1.09 million homes, the Commerce Department reported Tuesday.
Home prices are also increasing at a slower clip, which should help ease affordability pressures.
Prices rose 7.4 per cent in July from July 2013, according to real estate data provider CoreLogic. That was slightly below June’s year-over-year increase of 7.5 per cent and far below a recent peak of 11.9 per cent in February.
Yet incomes remain weak, making it more taxing for would-be buyers trying to save for a down payment.
The Census Bureau said last week that median household incomes were $51,939 in 2013. Adjusting for inflation, that’s 8 per cent lower than in 2007, when the recession began.
And mortgage rates have begun to rise from recent lows.
Average rates for 30-year mortgages rose last week to 4.23 per cent from 4.12 per cent, according to mortgage company Freddie Mac. Mortgage rates are below the levels at the start of this year, yet they’re up from their 52-week low of 4.1 per cent.
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