Fewer listings and an exodus of investors weakened home sales in August.
The number of signed contracts to buy existing homes fell 1 percent in August compared to July and is down 2.2 percent from August of 2013, according to the National Association of Realtors. Analysts had been expecting these so-called pending home sales, a future indicator of closed sales, to remain unchanged month-to-month. The Realtors' pending home sales index is still, however, at its second highest level in the last year.
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"Fewer distressed homes at bargain prices and the acknowledgement we're entering a rising interest rate environment likely caused hesitation among investors last month," said Lawrence Yun, chief economist for the Realtors. "With investors pulling back, the market is shifting more towards traditional and first-time buyers who rely on mortgages to purchase a home."
Regionally, pending home sales fell 3 percent month-to-month in the Northeast, fell 2.1 percent in the Midwest, were down 1.4 percent in the South and rose only in the West, up 2.6 percent from July.
While supplies of for-sale homes had been rising through the first half of this year, that trend appears to be turning; listings usually drop off in the fall and winter months, but the number of newly listed homes fell 9.3 percent from July to August, compared with an average drop of 3.2 percent between July and August over the past five years," according to Redfin, a real estate brokerage.
Buyer demand, however, does not appear to be falling off. Redfin also found customer traffic up over 37 percent in August year-over-year.
"The seemingly incongruous August numbers reflect the mindsets of buyers and sellers," noted Nela Richardson, Redfin's chief economist. "Buyers want to buy, but they're patient, and more careful not to overpay. At the same time, sellers are adjusting to having less power, which seems to have put a damper on some listing their homes."
Home prices, while still rising on a national basis, are moderating from the big jumps seen last year. Prices rose 5.1 percent in July, year-over-year, according to a report released Monday by Black Knight Financial Services. The annual gains have been shrinking for several months. Home prices are still about 10 percent below their peak in 2006.