Existing home sales decreased in August, after a four-month stretch of increases, according to a release issued on Thursday.
According to a report issued by the National Association of Realtors, NAR, on Thursday, existing home sales declined by 2.7 percent to 5.10 million annualized units in August from an annualized 5.24 million units in July. This news disappointed most analysts who expected an increase to 5.35 million in August home sales according to Briefing .com.
Home sales dropped in three out of the four regions of the nation. Existing sales fell by 6.6 percent, 3.1 percent and 2.2 percent in the Midwest, South, and Northeast, respectively, while increasing 2.7 percent in the West.
Still, the 5.1 million units pace in August is the second strongest monthly pace for nearly one year. Further, home sales rose 3.4 percent in August from a year ago.
The median price of existing homes sold in August was $177,700, a 12.5 percent drop from a year ago. However, the pace of home price depreciation slowed from July when home prices fell 13.6 percent from a year earlier.
In its report, the NAR said that distressed properties, which include foreclosures and short sales, are pushing down the median home price because they typically sell for 15-20 percent less than traditional homes. Distressed property sales comprised 31 percent of total existing home sales in August.
On a positive note, the inventory situation improved markedly in August with the months’ supply dropping to 8.5, the lowest number since April 2007. Months’ supply measures how many months it would take to deplete the inventory of existing homes given the current sales pace. The primary reason for the sharp drop in months’ supply was a substantial decrease in home listings in August compared to July. According to NAR numbers, a drop-off in listings in August has been typical for the past several years.
With a steady flow of foreclosures projected during the next two years, housing inventories could become a greater problem. NAR Chief Economist, Lawrence Yun, said in a prepared statement: “With an expected rise in foreclosures over the next 12 months, we need to maintain a healthy level of ready buyers to absorb the inventory.”
Looking forward, it may be difficult to accomplish that objective. The $8,000 tax credit, which has been utilized by a large number of first-time buyers, is set to expire at the end of November. Many housing economists, including Yun, are calling for the Obama administration to extend the tax credit in order to keep first-time buyers purchasing homes.