August existing-home sales up 1.3 percent
Marking the second month of consecutive growth, existing home sales increased by 1.3 percent in August. At a seasonally adjusted annual rate of 5.49 million, overall sales are up 2.6 percent from a year ago.
NAR’s chief economist, Lawrence Yun, credits lower mortgage rates. “As expected, buyers are finding it hard to resist the current rates,” he explains. “The desire to take advantage of these promising conditions is leading buyers to the market.”
A call for construction
August’s median existing-home price was $278,200—up 4.7 percent from last year and marking the 90th straight month of year-over-year gains. Yun weighs in explaining the need for construction. “Sales are up, but inventory numbers remain low and are thereby pushing up home prices. 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,” says Yun.
The total housing inventory decreased from 1.90 million in July to 1.86 million existing-homes available in August—a 2.6 percent decrease from a year ago. Down from both last month and last year, unsold inventory is at a 4.1-month supply, decreasing from 4.2 months in July and 4.3 months in August of last year. Properties typically remained on the market for 31 days in August, which is a two-day increase from both July and August of 2018.
The potential for economic growth
Freddie Mac reports the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased from 3.77 percent in July to 3.62 percent in August, while the average commitment rate across all of 2018 was 4.54 percent.
Yun speaks to the housing sector’s potential stating, “The Federal Reserve should have been bolder and made a deeper rate cut, given current low inflation rates. The housing sector has been broadly underperforming but there is a huge upward potential there that will help our overall economy grow.”
Responsible for 31 percent of sales in August, first-time buyers remained flat from last year’s share of 31 percent in August of 2018. NAR reports the annual share of first-time buyers in 2018 was 33 percent. Individual investors or second-home buyers purchased 14 percent of homes on the market this August—an increase from July’s 11 percent and August 2018’s 13 percent.
NAR President John Smaby is optimistic about the pursuit of homeownership for Americans. “Rates continue to be historically low, which is extremely beneficial for everyone buying or selling a home. The new condominium loan policies, as well as other reforms NAR is pursuing within our housing finance system, will allow even more families and individuals in this country to reach the American Dream of homeownership.”
Three out of the four major regions report growth
August’s existing home sales increased in the Northeast, Midwest and South regions, but decreased slightly in the West, though all four regions reported growth in comparison to last year. August existing-home sales increased 7.6 percent in the Northeast (up 1.4 percent from last year), 3.1 percent in the Midwest (up 2.3 percent from last year), and 0.9 percent in the South (up 3.6 percent from last year). And while existing-home sales in the West decreased 3.4 percent, this is a 1.8 percent increase from last year.