Sales of previously owned homes came in 18.6 percent higher last month when compared to August 2010, according to data released Wednesday by the National Association of Realtors (NAR).
Completed transactions rose 7.7 percent on a month-over-month basis to a seasonally adjusted annual rate of 5.03 million, up from 4.67 million in July.
The latest numbers far surpassed market expectations. Many analysts were forecasting a decline while others were predicting a much more modest increase, with projections for the annual rate ranging between 4.61 million and 4.80 million.
The research firm IHS Global Insight issued its forecast last week ahead of NAR’s report, with a word of warning that the market should be expecting “the lowest sales pace in 10 months.”
The firm’s analysts explained their rationale on declining consumer demand to buy homes, even as mortgage rates have dropped to record lows.
They noted that in August, the Mortgage Bankers Association’s purchase index dropped for the fifth straight month, plunging 11.9 percent.
“Based on this reading, and on the 1.3 percent drop in the Pending Home Sales Index in July, we project that existing home sales dropped 1.3 percent to a 4.61-million-unit annual rate in August,” IHS said. But Lawrence Yun, NAR’s chief economist, says he sees “some positive market fundamentals,” even in the face of such headwinds as tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene.
“Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations,” Yun said.
“Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation,” Yun added.
Investors accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010, according to NAR’s study.
First-time buyers purchased 32 percent of homes last month, with the balance of sales activity coming from repeat buyers.
NAR says all-cash sales accounted for 29 percent of transactions in August.
Contract failures were reported by 18 percent of NAR members in August, up from 16 percent July and 9 percent in August 2010. NAR says sales cancellations are primarily caused by declined mortgage applications or appraised values coming in below the negotiated price.
The trade group’s study shows that the national median existing-home price for all housing types was $168,300 in August, which is 5.1 percent below August 2010.
Total housing inventory at the end of August fell 3.0 percent to 3.58 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace. That’s down from a 9.5-month supply in July.
Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 31 percent of last month’s sales transactions, compared with 29 percent in July and 34 percent in August 2010.
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