Existing-home sales posted an unexpected 2.7% decline in August, to a 5.1 million-unit annual rate, the first reversal after four months of gains, the National Association of Realtors reported on Sept. 24. Economists polled by Thomson Reuters (TRI) had expected a gain of 2.1% and an annual rate of 5.35 million, up from 5.24 million in July.
Stocks turned lower midmorning on the news.
The real estate group said the sales pace of existing homes, which includes single-family units, townhomes, condominiums, and co-ops, is still 3.4% above the rate of a year ago.
"The data are weaker than expected, and suggest the recovery in housing will be very slow," said Standard & Poor's Chief Economist David Wyss.
"Can't Take a Rebound for Granted" Over the past four months, existing sales had risen 15.2%, spurred largely by a tax credit for first-time home buyers and sales of foreclosed homes. The tax credit of up to $8,000 is due to expire at the end of November, but there have been calls for an extension.
"Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus," said Lawrence Yun, the realty group's chief economist, in a news release. "The first-time buyer tax credit is having the intended impact of bringing buyers into the market, allowing them to take advantage of very favorable affordability conditions. Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process, but the decline demonstrates we can't take a housing rebound for granted."
The NAR said first-time buyers purchased 30% of homes in August, and that "distressed homes" accounted for 31% of sales, figures that were unchanged from July. The median single-family home price fell to $177,500, down 12.1% from a year earlier, and sales fell in all four national regions.
Paul Dales, senior U.S. economist for Capital Economics, said the decline appeared to be a "temporary blip" in an "improving trend," aided by falling mortgage rates as well as the first-time-buyer credit. "Despite the dip in sales, the months' supply of homes for sale fell from 9.3 in July to 8.5 in August, leaving it even further below November's peak of 11.0. Supply is therefore getting close to the level of 7.5 months that has historically been consistent with stable house prices. That all said, home sales remain 30% below their peak and the fallback in August illustrates that the recovery is going to be gradual and patchy rather than quick and firm."