Home sales slightly slipped in August following four previous months of gains, National Association of Realtors’ (NAR) data show.
The decrease in August home sales can be attributed to cash-paying investors retreating from the market, NAR analysts say, noting that a decline in investor activity also bodes well for buyers who rely on financing to purchase a home.
Total existing-home sales decreased 1.8% to a seasonally adjusted annual rate of 5.05 million in August from a revised 5.14 million in July.
While it remains to be seen if home sales will continue to slip in September, Lawrence Yun, NAR chief economist, said investors may be stepping back due to indications that interest rates will soon rise.
“One possibility [investors are stepping back] is a clear signal from the Federal Reserve that interest rates will be rising,” Yun said in a release. “And from an investor’s point of view — they have cap rates. So, when interest rates rise their cap rate is less attractive in a rising interest rate environment.”
The median existing-home price for all housing types in August was $219,800, which is 4.8% above August 2013. This marks the 30th consecutive month of year-over-year price gains.
Total housing inventory at the end of August declined 1.7% to 2.31 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace. However, unsold inventory is 4.5% higher than a year ago, when there were 2.21 million existing homes available for sale.
A gradual decline in investor activity, many of whom pay in cash, is good for the market and creates more opportunity for buyers who rely on financing to purchase a home, said NAR President Steve Brown, co-owner of Irongate, Inc., Realtors in Dayton, Ohio.
The percent share of first-time buyers remained unchanged in August from July at 29%. First-time buyers have represented less than 30% of all buyers in 16 of the past 17 months.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage fell for the fourth consecutive month to 4.12% in August from 4.13% in July, and remains at the lowest rate since June 2013.
The Pending Home Sales Index for August will be released Sept. 29, and existing-home sales for September is scheduled for Oct. 21.
Written by Cassandra Dowell