US existing home sales fall to 12-month low
US home resales fell to their lowest in a year in August as Hurricane Harvey depressed activity in Houston and a perennial shortage of properties on the market sidelined buyers.
The National Association of Realtors said yesterday existing home sales decreased 1.7 percent to a seasonally adjusted annual rate of 5.35 million units last month. That was the lowest level since August 2016.
July’s sales pace was unrevised at 5.44 million units. Economists had forecast sales rising 0.3 percent to a 5.46 million-unit rate.
The NAR said Harvey, which struck Texas in the last week of August, had resulted in sales in Houston declining 25 percent on a year-on-year basis. Stripping out Houston, existing home sales would have been unchanged in August.
Home resales in the South tumbled 5.7 percent last month. Harvey, and a second hurricane, Irma, which slammed Florida early this month could hurt September home resales. Texas and Florida account for more than 18 percent of existing home sales. Sales lost because of delays in closing contracts will be recouped in 2018, the Realtors group said.
US financial markets were little moved by the data as traders awaited the conclusion of the Federal Reserve’s two-day policy meeting later yesterday. The US central bank is expected to announce a plan to start shrinking its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, accumulated as the Fed sought to stimulate the economy following the 2008 financial crisis.
Housing stalling
Even before the hurricanes struck, the housing market had been slowing as supply failed to keep up with strong demand. Sales were up 0.2 percent from August 2016. Home sales have virtually stalled this year amid tight inventories that have resulted in home price increases outpacing wage gains.
Builders have blamed shortages of labor and land for their inability to ramp up construction. They have also complained about higher costs of building materials.
Economists and builders say Harvey and Irma could worsen the housing shortage as scarce labor is pulled toward the rebuilding effort and building materials are bid higher.
A report on Tuesday showed housing completions tumbling to a 10-month low in August. At the same time single-family home permits fell to a three-month low. These developments suggest housing inventory will remain troublesome for a while.
The NAR said the number of homes on the market fell 2.1 percent to 1.88 million units in August. Supply was down 6.5 percent from a year ago. Housing inventory has dropped for 27 straight months on a year-on-year basis. As a result, the median house price increased 5.6 percent from a year ago to $253,500 in August. That was the 66th consecutive month of year-on-year price gains. Annual wage growth has not exceed 2.5 percent.
Pointing to strong demand for houses, existing homes sold in August typically stayed on the market for 30 days. That compared to 36 days a year ago. Demand for housing is being driven by a tight labor market, marked by a 4.4 percent unemployment rate, which is boosting employment opportunities for young Americans. The housing market also remains supported by historically low mortgage rates, with the 30-year fixed mortgage rate averaging 3.78 percent.
High house prices as a result of tight inventories are sidelining first-time homebuyers. In August, first-time buyers accounted for 31 percent of transactions, well below the 40 percent share that economists and realtors say is needed for a robust housing market.
August’s share of first-time homebuyers was the smallest in a year and was down from 33 percent in July. Sales rose 10.8 percent in the volatile Northeast and climbed 2.4 percent in the Midwest. They dropped 4.8 percent in the West, where the price increases and property shortages have been concentrated. — Reuters