U.S. existing home sales retreated 1.8 percent to a 5.05 million annual pace in August.
Pending home sales dropped in August for the same reason closings did— investors retreated from the housing market
The National Association of Realtors’ Pending Home Sales Index, which is based on contract signings, fell 1 percent last month to 104.7. That number still represents an above-average level of contract activity.
But traditional home buyers who rely on mortgages will have to carry the housing market going forward — investors who pay cash aren’t buying as many homes as they were.
“Fewer distressed homes at bargain prices and the acknowledgement we’re entering a rising interest rate environment likely caused hesitation among investors last month,” said NAR Chief Economist Lawrence Yun.
The question is whether first-time buyers will become bigger players in the housing market. They’ve represented less than one-third of home purchasers over the past two years.
Yun thinks their share will go up gradually.
“The employment outlook for young adults is brightening and their incomes finally appear to be rising,” he said. “Jobs and income gains will help repay student debt and better position first-time buyers, setting the stage for improved sales growth in upcoming years.”
Yun projects existing home sales will total 4.94 million this year, down 3 percent from 2013.
The South remains the hottest market, with a Pending Home Sales Index of 117. The Northeast is the coolest, with an index of 86.5.
Source: Nightly Business Report and Bloomberg