WASHINGTON – A decrease in investor purchases prompted an unexpected decline in sales of U.S. existing homes in August, indicating the housing rebound is not yet self-sustaining.
Purchases of previously owned houses dropped 1.8 percent to a 5.05 million annual pace from a 5.14 million rate in July, the National Association of Realtors reported Monday. The share of properties sold to investors was the lowest in almost five years.
Transactions at the lower end of the market are suffering as the potential for higher interest rates makes housing a less attractive investment. First-time buyers have yet to fill the void amid slow wage gains and tight credit.
The drop "adds to some of the trepidation" about a slowdown in housing, said Anika Khan, a senior economist at Wells Fargo Securities in Charlotte, N.C., who projected sales would fall. "As we start to see overall improvement in employment," particularly for younger Americans, "we'll start to see that first-time home buyer activity increase."
Stocks declined, led by a plunge among small companies, as China's finance minister damped hopes the world's second-biggest economy would get additional stimulus. The Standard & Poor's 500 index fell 0.8 percent to 1,994.29 at the close.
The median forecast of 72 economists in a Bloomberg survey called for sales of existing homes to rise to a 5.2 million rate. Estimates ranged from 5 million to 5.35 million. The July figure was revised from a previously reported 5.15 million.
All-cash purchases fell to about 23 percent of the market from the usual 33 percent, NAR Chief Economist Lawrence Yun said at a news conference as the figures were released. Investors accounted for 12 percent, the least since late 2009, he said.
The drop in sales last month is "primarily attributable to investors stepping out of the market," he said.
Demand for homes priced at $100,000 or less slumped 15.9 percent last month, reflecting a lack of inventory of distressed properties, Yun said. Those transactions, which include foreclosures and short sales where a seller accepts a price lower than the underlying mortgage, accounted for 8 percent of the market in August, the least since records began in October 2008, according to real estate agents' group.
The drop in investor activity could be a one-month fluke or may also represent growing concern that Federal Reserve policymakers will soon boost interest rates, Yun said. Higher interest rates make investing in real estate less attractive.
