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US existing home sales decline unexpectedly in August: NAR

H.S. Borji
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US existing home sales decline unexpectedly in August: NAR

The sale of previously-owned US homes declined unexpectedly in August after four consecutive monthly gains boosted optimism the housing recovery was finally gaining traction.

Existing US home sales tumbled 1.8 percent to a seasonally adjusted annual rate of 5.05 million, following a downwardly revised gain of 2.2 percent the previous month, the National Association of Realtors reported today. A median estimate of economists called for a monthly gain of 1 percent.

Sales in August were at the second highest pace in all of 2014. Compared to August 2013, sales were down 5.3 percent, NAR data showed.

Sales rose in two of the four US regions, led by a 4.7 percent gain in the Northeast. Existing home sales rose 2.5 percent in the Midwest. Meanwhile, sales declined 4.2 percent in the South and 5.1 percent in the West.

Total inventory at the end of August fell 1.7 percent to 2.31 million. At the current sales pace, it would take 5.5 months to clear existing inventories.

“There was a marked decline in all-cash sales from investors,” said NAR chief economist Lawrence Yun in a statement. “On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”

“As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying,” Yun also added.

The economic data continue to paint a mixed picture of the housing recovery. Housing starts and building permits tumbled more than expected in August, thwarting hopes for a broad pick-up in residential real estate activity.

Housing starts declined 14.4 percent in August to a seasonally adjusted annual rate of 956,000, the Commerce Department reported last week. Economists forecast starts to decline to 1.04 million. Single-family housing starts, which represent the largest component of the market, declined 2.4 percent to 643,000.

Meanwhile, building permits fell 5.6 percent in August to an annual pace of 998,000. Economists forecast a fall to 1.045 million. Authorizations for single-family homes declined 0.8 percent to 626,000, official data showed.

A separate report released last week said US homebuilder confidence rose sharply in September, as current sales, future sales expectations and buyer traffic all increased. The housing market index, courtesy of the National Association of Home Builders, rose four points in September to 59, the highest reading since November 2005.

The Commerce Department on Wednesday will report on new home sales. The sale of new homes is forecast to rebound in August after declining sharply over the summer.

New home sales declined 2.4 percent in July to an annual rate of 412,000, following a bigger than expected drop of 7 percent in June. New home sales are forecast to rebound to 433,000 in August.

Rising mortgage rates, higher house costs and weak earnings growth are expected to weigh on the housing recovery in the coming years. These factors will weigh especially on the more expensive new residential housing market.

The average sales price of a new home in July reached a record of $339,100.

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