August Existing Home Sales

After four consecutive months of increases, existing home sales dropped in August according to the Nations Association of Realtors.  On a seasonally adjusted annualized basis, the number of completed transactions declined 1.8 percent to 5.05 million units.  This follows July’s downwardly revised count of 5.14 million (originally 5.15 million).  Despite the slowdown, August’s was the second highest pace of 2014.  However, sales were 5.3 percent lower than a year earlier.

Regional differences and cash buyers put pressure on the monthly tally.  Existing home sales in the south declined 4.1 percent in August.  Transactions in the west dropped 5.1 percent in the period.  Midwest and Northeast sales increased 2.4 percent and 4.7 percent respectively.  Unfortunately, the Northeast is the smallest market in the country and account for just 670,000 units.  The South is the most active of the four territories, so its decline coupled with the slowdown in the West overwhelmed the other two sections of the country.  Cash transactions were 23 percent of the total in August, down for the second month in a row after comprising 29 percent of July’s deals.  All-cash sales now represent the lowest overall share since December 2009 when they were 22 percent of the total.

Price measures were mixed.  The median existing-home price was $219,800, which is 4.8 percent higher than a year earlier.  Year-over-year price changes have been positive for 30 consecutive months.  However, month-over-month prices fell for a second consecutive period in August.  If June 2014 is the maximum value for the median sales price this year, it will be the sixth year in a row where June is the most expensive month on that basis.

Atlas finds the statistic on all-cash buyers to be the most interesting of this report.  If those capable of paying cash for a home are leaving the market, they will need to be replaced in order to support a larger number of transactions.  First-time homebuyers are one source of additional demand, but this cohort did not increase their relative participation in the period.  Their share of transactions remained level at 29 percent.  They have also been under 30 percent of the total for 16 out of the past 17 months, so they are not exhibiting signs of acceleration.  If all-cash investors and previous renters do not increase their representation in sales, demand will wane, which may cause prices to fall.            (by C. Cox)