U.S. Existing-Home Sales Fall to a One-Year Low After Harvey

Sales of previously owned U.S. homes declined to a one-year low in August as affordability continued to hamper demand and Hurricane Harvey caused a slump in Houston-area purchases, a National Association of Realtors report showed Wednesday.

Highlights of Existing-Home Sales (August)

  • Contract closings fell 1.7% m/m to a 5.35m annual rate (est. 5.45m)
  • Purchases in Houston decreased 25% y/y; excluding Harvey’s effect, sales would have been “flat,” according to NAR’s chief economist
  • Median sales price rose 5.6% y/y to $253,500
  • Inventory of available properties decreased 6.5% y/y to 1.88m, marking the 27th consecutive year-on-year decline

Key Takeaways

While decreased purchase activity in Houston helped push down the sales count nationwide, and may continue to do so in coming months, residential real estate is struggling to improve because of declining affordability, NAR said in the report. 

Housing data may be volatile for several months in the wake of Harvey and Irma. As a result, U.S. sales in 2017 will probably be weaker than they were last year, according to the group, which plans to issue a revised forecast next week. A pause in both sales and construction in Texas and Florida as clean-up efforts continue will probably give way to improving demand later this year and into next, according to economists.

Even before the storms, home price growth was exceeding wage gains because of lean inventory, crimping affordability for some and leaving buyers with fewer properties to choose from. At the same time, a steady job market and still-low borrowing costs remain sources of support for the housing recovery.

Existing-home sales account for 90 percent of the market and are calculated when a contract closes. New-home sales, considered a timelier indicator though their share is only about 10 percent, are tabulated when contracts get signed.

Economist Views

“It’s the lack of inventory that’s pushing up prices,” Lawrence Yun, NAR’s chief economist, said at a press briefing accompanying the report. “Consumers are feeling their budgets are being constrained because of housing costs.”

At the same time, “whatever is showing up is being snatched up quickly” by buyers, Yun said.

Other Details

  • August purchases dropped 5.7 percent in the South, which includes the Texas market, to lowest level since November 2015
  • Decline was largest among the four regions; sales in West fell 4.8 percent
  • At the current pace, it would take 4.2 months to sell the homes on the market, unchanged from the prior month and down from a year earlier; Realtors group considers less than five months’ supply consistent with a tight market
  • Single-family home sales decreased 2.1 percent to an annual rate of 4.74 million
  • Purchases of condominium and co-op units rose to a 610,000 pace
  • First-time buyers made up 31 percent of all sales, a one-year low, compared with 33 percent the prior month; 40 percent is ‘normal’ share, NAR’s Yun says
  • Homes typically sold in 30 days, compared with 36 days in August 2016
  • 51 percent of homes sold in August were on market for less than a month

Watch Next: Rep. Green Says Harvey Recovery Will Take Years

— With assistance by Jordan Yadoo

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