Existing Home Sales Have Surprising Drop in August

“There was a marked decline in all-cash sales from investors,” said Lawrence Yun, NAR chief economist. “On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”

Yun added that sales activity still remains stronger than in early 2014 and is at the second highest pace in 2014. “As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying,” he said.

Housing inventory declined 1.7 percent to 2.31 million existing homes for a 5.5 month supply at the current sales pace but remains 4.5 percent higher than inventory levels one year ago.

Regionally, sales increased in the Midwest and Northeast, but declined in the South and West.

The median price for existing homes was $219.800, a 4.8 percent gain from August 2013. Prices have increased on a year-over-year basis for 30 consecutive months.

The Federal Reserve bond buying program is winding down but the main interest rate is expected to remain low for a considerable period after the program ends. Mortgage rates dropped to 4.23 percent in the week ended September 18 according to Freddie Mac data. Buyers are still challenged by tight credit standards and slow gains in wages.