Sales Fall Most Since April As Housing Market Tightens
The latest National Association of Realtors monthly data on existing US home sales shows that in August, sales fell at the fastest pace since January, down 4.8% from July to a seasonally-adjusted annual level of 5.31 million, down from July’s level of 5.58 million, the highest in more than eight years. Over the past year, the AP notes, “solid job growth and low mortgage rates” have combined to push sales 6.2% higher than the previous year. However, median home prices are also up 4.7%, more than twice the rise in average hourly wages, likely leaving many potential buyers out of the market. However, despite the decrease in existing home sales as a whole, there were some positive numbers. First-time home buyers were 32% of all sales in August, up from 28% in July. Additionally, foreclosures and short sales dropped to their lowest level in almost seven years. The Wall Street Journal reports that the decline was greater than anticipated, as evidenced by the fact that economists in a Journal poll predicted a drop of 1.1% to an annual rate of 5.53 million. Bloomberg News reports that a shortage of inventory is partly to blame for the monthly decline. The Hill quotes Lawrence Yun, the NAR chief economist, as saying, “Sales activity was down in many parts of the country last month – especially in the South and West – as the persistent summer theme of tight inventory levels likely deterred some buyers.” But, on a positive note, “price appreciation the last two months has started to moderate from the unhealthier rate of growth seen earlier this year,” he said.
What Happens Next
Though sales will be strongest since the recession in 2015, NAR projects, the AP notes the group expects sales will be relatively flat during the fourth quarter. However, BMO Capital Markets economist Jennifer Lee explained, “Given stronger job growth, and low rates that are going to be sticking around for at least a little while longer, the U.S. housing market is still in good shape.” Similarly, Redfin chief economist Nela Richardson said, “People are not that concerned that a rate hike will torpedo their plans to buy a house.” Rather, they are concerned about qualifying for mortgages to begin with, Richardson added.
What This Means For Small Businesses
Small businesses in the construction sector may be affected by sales in the housing market. The latest data shows that although sales are still strengthening, the housing market isn’t recovering as quickly or completely as other sectors, and there is still work to be done to improve overall economic conditions.
Additional Reading
MarketWatchand Reuters are among the other outlets covering the housing data.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.
