The National Association of Realtors is reporting that existing-home sales fell slightly in August, but that doesn’t necessarily mean the end of an active summer selling season. According to the association, buyer demand remands high, while price appreciation is normalizing.
Existing-home sales had experienced gains for three straight months during the summer, but August sales fell 4.8 percent to 5.31 million in August, NAR said. However, the association noted that despite the decline, sales were still up 6.2 percent compared to the same period last year.
Total housing inventory at the end of August rose 1.3 percent to 2.29 million existing homes available for sale, but that figure is 1.7 percent lower than a year ago. Unsold inventory is at a 5.2-month supply at the current sales pace, up from 4.9 months in July.
At the same time, the median price for existing homes of all types rose 4.7 percent to $228,700 compared to August 2014, marking the 42nd consecutive month of year-over-year-gains, NAR said.
“With sales and overall demand higher than a year ago and supply mostly unchanged, low inventories will likely continue to limit options for those looking to buy this fall even with the overall pool of buyers shrinking because of seasonal factors,” said NAR Chief Economist Lawrence Yun.
But housing demand will probably not be affected by the Federal Reserve’s interest rate hike, which is expected before the end of the year, Yun predicted.
“With job growth holding steady, prospective buyers can handle any gradual rise in mortgage rates — especially if today’s stronger labor market finally leads to a boost in wages and homebuilding accelerates to alleviate supply shortages and slow price growth in some markets,” he said.
Commenting on NAR’s report, Trulia Chief Economist Selma Hepp attributed the sales decline to three forces: anticipation of the Fed’s potential rate increases, uncertainties abroad and volatility in the financial markets.
“Low inventories will likely continue to limit options for those looking to buy this fall even with the overall pool of buyers shrinking because of seasonal factors.” – Lawrence Yun, NAR Chief Economist
Noting that the consumer confidence index in August still showed persistent consumer optimism, Hepp said the report also indicated a noticeable drop — from 5.9 percent to 4.1 percent — in the share of respondents who plan to buy a home in the next six months.
Even though home sales typically see a slowdown heading into the winter months, this drop was unusually high, Hepp said.
Still, Hepp also agreed with Yun that a rate hike will likely have little impact on buyer demand. A recent Trulia survey found that rates would have to hit higher than 6 percent to turn buyers off, and they are more worried about getting a mortgage or finding a home they like, anyway.
“At less than 4 percent today, rates are still a ways away of scaring consumers off. We’ll need to wait for the next Fed meeting in December to see if the prospect of raising rates by the end of the year may pull some demand forward,” Hepp said.