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Low Inventory Sparks Existing Home Sales

Sorohan, Mike
Existing home sales increased in August to their highest level in more than six years, while the median price shows nine consecutive months of double-digit year-over-year increases, the National Association of Realtors said yesterday.
NAR said total existing-home sales rose by 1.7 percent to a seasonally adjusted annual rate of 5.48 million in August from 5.39 million in July, and were 13.2 percent higher than the 4.84 million-unit level a year ago. Sales are at the highest pace since February 2007, when they hit 5.79 million, and have remained above year-ago levels for the past 26 months.

The report said single-family home sales rose by 1.7 percent to 4.84 million in August from 4.76 million in July, and were 12.8 percent higher than the 4.29 million-unit pace a year ago. The median existing single-family home price was $212,200, 14.4 percent higher than a year ago. Existing condominium and co-op sales rose 1.6 percent to 640,000 units from 630,000 in July and were 16.4 percent above the 550,000-unit level a year ago. The median existing condo price was $211,700, up by 17.7 percent from a year ago.
Regionally, existing home sales in the Northeast were unchanged at 710,000 in August but were 12.7 percent higher than a year ago. The median price was $268,800, up 7.6 percent from a year ago. Sales in the Midwest increased by 3.1 percent to 1.32 million and were 18.9 percent higher than a year ago. The median price was $166,100, 10.0 percent above a year ago.
In the South, existing home sales rose by 3.8 percent to 2.19 million and were 13.5 percent above a year ago.  The median price was $181,000, up 14.6 percent from a year ago. Sales in the West declined by 2.3 percent to 1.26 million but were 7.7 percent higher than a year ago. With the tightest regional inventory conditions, the median price in the West rose to $287,500, 18.8 percent above a year ago.
NAR Chief Economist Lawrence Yun said the market may be experiencing a temporary peak. “Rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions,” he said. “Tight inventory is limiting choices in many areas, higher mortgage interest rates mean affordability isn’t as favorable as it was and restrictive mortgage lending standards are keeping some otherwise qualified buyers from completing a purchase.”
NAR said total housing inventory at the end of August increased by 0.4 percent to 2.25 million existing homes available for sale, representing a 4.9-month supply at the current sales pace, down from a 5.0-month supply in July, but 6.3 percent below a year ago (6.0 months). Yun said limited inventory in some areas means multiple bidding remains a factor; 17 percent of all homes sold above the asking price in August, although 63 percent sold below list price. NAR noted large declines in inventory from a year ago in Naples, Fla., down 23.5 percent; the Detroit area, down 23.3 percent; and the greater Boston area, down 20.7 percent.
NAR said the national median existing-home price for all housing types rose to $212,100 in August, up 14.7 percent from a year ago, representing the strongest year-over-year price gain since October 2005 when the median rose 16.6 percent, and marking 18 consecutive months of year-over-year price increases.
The report said distressed homes accounted for 12 percent of August sales, down from 15 percent in July, the lowest share since monthly tracking began in October 2008; they were 23 percent a year ago. The report cited ongoing declines in the share of distressed sales as responsible for some of the growth in median price. Eight percent of August sales were foreclosures; 4 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in August, while short sales were discounted 12 percent.

The median time on market for all homes was 43 days in August, little changed from 42 days in July, but faster than the 70 days on market a year ago. Short sales were on the market for a median of 98 days, while foreclosures typically sold in 52, days and non-distressed homes took 41 days. Forty-three percent of homes sold in August were on the market for less than a month.
First-time buyers accounted for 28 percent of purchases in August, down from 29 percent in July and 31 percent a year ago. All-cash sales comprised 32 percent of transactions in August, up from 31 percent in July and 27 percent a year ago. Individual investors, who account for many cash sales, purchased 17 percent of homes in August, compared to 16 percent in July and 18 percent a year ago. Three out of four investors paid cash.
Also yesterday, The Conference Board, New York, said its Leading Economic Index for the U.S. increased by 0.7 percent in August to 96.6, following an 0.5 percent increase in July and no change in June.

The Coincident Economic Index for the U.S. increased by 0.2 percent in August to 106.3, following an 0.1 percent increase in July and no change in June. The Lagging Economic Index increased by 0.3 percent in August to 118.6, following an 0.1 percent decline in July and an 0.3 percent increase in June.

“If the LEI’s six-month growth rate, which has nearly doubled, continues in the coming months, economic growth should gradually strengthen through the end of the year,” said Ataman Ozyildirim, economist with The Conference Board. “Despite weakness in residential construction, consumer expectations and the stock market, improvements in the LEI’s labor market and financial components, as well as new manufacturing orders, drove this month’s gain.”
“The latest reading points to more pep in the pace of economic activity in the near term,” added Ken Goldstein, economist with The Conference Board. “One unknown is how resilient confidence will remain, both consumer and business, given the mixed signals from the housing and labor markets. Perhaps the bigger question is a satisfactory resolution to federal budget squabbles.”