Sales of Existing Homes Unexpectedly Declined in August

Sales of previously owned homes unexpectedly declined to a six-month low in August, signaling buyers are getting discouraged by a lack of properties to choose from, National Association of Realtors data showed Thursday.

Contract closings fell 0.9% to a 5.33 million annual rate (the forecast was 5.45 million). Sales rose 7.3% from August 2015 before seasonal adjustment. The median price of an existing home increased 5.1% from August 2015 to $240,200, while inventory of available properties fell 10.1% from a year earlier to 2.04 million, the fewest homes since March.

A shortage of available properties for sale continues to hinder the market, the report showed, with inventories on a year-over-year basis falling for a 15th straight month in August. Even with the moderation in purchase activity last month, the repeat sales market is expected to grow this year amid steady hiring and borrowing costs that are still near record lows. Faster wage growth along with more listings and construction of entry-level properties would help provide a bigger boost to the housing recovery.

The slowdown "is somewhat surprising given the broader economy is creating jobs," Lawrence Yun, chief economist at the Realtors group in Washington, told reporters as the figures were released. "Inventories is the key factor that is missing in this housing market recovery." If more inventory comes back on line with the help from builders, the housing recovery can move forward, he said.

Sales dropped in three of four regions, including a 2.7% decrease in the South and a 1.6% decline in the West. At the current pace, it would take 4.6 months to sell the houses on the market, down from 4.7 months in July; the Realtors group has said that less than a five-month supply represents a tight market.

Properties were on the market for 36 days, compared with 47 days a year ago. Single-family home sales decreased 2.3% to an annual rate of 4.7 million while purchases of condominium and co-op units rose 10.5% to a 630,000 pace. First-time buyers accounted for 31% of all sales, compared with 32% the prior month.

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