August Existing Home Sales At Pre-Recession High

09/19/2013 By: Mark Lieberman, Five Star Institute Economist 

 

Existing home sales rose an unexpected 6.5 percent in August to an annual sales rate of 5.48 million, the highest level since February 2007 – ten months before the onset of the Great Recession — the National Association of Realtors reported Thursday. Economists surveyed by Bloomberg expected existing home sales to drop to 5.255 million from July’s originally reported July’s 5.39 million sales pace which was unchanged in today’s report.

The increase in sales came as the median price of an existing single family home in August dipped slightly from July, down $300 to $212,100. It was the second straight month-month price drop.
The inventory of homes for sale edged up to 2.25 million from 2.24 million in July, computing to a 4.9 month supply down from 5.0 in July and the lowest since February’s 4.7 month supply.
The sales increase came as mortgage rates continue to rise with buyers seeking to complete transactions before rates went up further. According to Freddie Mac, the rate for 30-year fixed rate loan in August was 4.46 percent (the average of the weekly rates), up from 4.37 percent in July.
The sales data came shortly after a the Federal Open Market Committee said tighter rates could be hindering the economic recovery and announced it would continue its monetary stimulus policy designed to “maintain downward pressure on longer-term interest rates [and] support mortgage markets.”
The NAR warned the strong sales pace might be a “temporary peak”, the association’s chief economist said “rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead.”
He warned “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.”
The stronger sales pace came despite a drop in the NAR’s forward-looking pending home sales index for June which dropped to 110.9 from 111.3 in May. The index fell again in July to 109.5.

The sales gain was driven by stronger activity in the South and Midwest where the sales pace increased by 80,000 and 40,000 respectively. The sales pace slipped 30,000 in the West and was unchanged in the Northeast. The median price rose month-month in the South and Midwest but fell month-month in the West and Northeast. The NAR usually cautions against month-month price comparisons which it said, “do not compensate for seasonal changes, especially for the timing of family buying patterns
With the August report, sales pace topped 5 million for the fourth month in a row for the first time since August-November 2007. The August sales rate was 640,000 or 13.2 percent ahead of August 2012, the 19th straight of year-year gains.
Existing home sales continue to be plagued though by a tight inventory. The number of homes on the in August was down 150,000 from a year earlier, the 30th straight month of annual inventory decline. The months’ supply of homes for sale in August – computed using the homes for sale and the sales pace — was down 1.1 months from a year earlier. The months’ supply has been down year-year for 26 straight months.
While down month-month in August, the median price was up $27,200 or 14.7 percent from a year earlier, the strongest dollar and percentage year-year gain since October 2005. Nonetheless, the median price of an existing single family home is down – 7.9 percent – from its July 2006 peak of $230,300
The median price in August though topped $200,000 for fourth month in a row for the first time since May-August 2008.
According to the NAR, distressed homes – foreclosures and short sales – 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 in August 2012. The decline in the share of distressed sales accounts for some of the year-year increase in the median price, since distressed homes sell at discounted prices. Eight percent of August sales were foreclosures, NAR said, and 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.
According to the Realtor group, the median time on market for all homes was 43 days in August, up from 42 days in July and 37 days in June, but less than the 70 days in August 2012. Non-distressed homes were on the market for 41 days, NAR said, while short sales were on the market for a median of 96 days and foreclosures for 52 days. Under half – 43 percent — of homes sold in August were on the market for less than a month.
With the recent increase in rates, all-cash sales made up 32 percent of transactions in August, up from 31 percent in July and June but down from 33 percent in May. NAR reported. All-cash sales were 27 percent in August 2012.
First-time homebuyers accounted for 28 percent of August sales, down from 29 percent in July and from 31 percent a year ago.