Fewer Americans bought homes last month, a sign that rising home values might be pushing more would-be buyers to the real estate market’s sidelines.
The US National Association of Realtors said on Monday that sales of existing homes fell 3.4 percent last month to a seasonally adjusted annual rate of 5.36 million.
The decline comes after strong growth in home-buying for much of this year, bolstered by steady job gains and low mortgage rates. Home purchases have advanced 3.9 percent from a year ago, even as buyers have fewer choices because the number of listings on the market has dropped 4.5 percent.
However, last month suggested the start of a reflexive backlash after the strong gains in home-buying. The additional sales have spawned sharp price increases that have outpaced wage growth and left some would-be buyers out of the market.
Last month’s sales decrease indicates “the market is treading water,” Pantheon Macroeconomics chief economist Ian Shepherdson said.
Yet other economists anticipate sales growth to return because of the underlying health of the broader economy.
“Despite the setback, home sales should resume higher in the face of rising rents, good job growth, improved consumer confidence and still-low mortgage rates,” BMO Capital Markets senior economist Sal Guatieri said.
The median home sales price was US$219,600 last month, a 5.8 percent annual increase. Sales fell sharply in the west and south, where prices have risen at the fastest rates this year. Purchases declined 8.7 percent in the west and 3.2 percent in the south, while dipping 0.8 percent in the midwest and staying unchanged in the northeast on a seasonally adjusted basis.
The 5 percent unemployment rate has helped coax traditional buyers into the market, supplanting the investors who bought foreclosed properties for all-cash in the aftermath of the Great Recession. Current homeowners seeking an upgrade or chance to downsize appear to have accounted for much of this year’s sales gains, as first-time buyers accounted for 31 percent of sales last month. First-time buyers have historically made up 40 percent of all sales.
Tight inventories are curbing enthusiasm among some home buyers. Just 4.8 months’ supply of homes is available, well below the six months associated with a balanced market.
The limited supplies and greater demand fueled higher home values. Home prices have appreciated at more than double the gains in average hourly earnings, requiring buyers to set aside more savings for a down payment or bid more fiercely for the most desirable properties.
Low mortgage rates have offset some of the pain from those price gains. However, rates have started to rise ahead of next month’s US Federal Reserve meeting, where Fed officials are expected to raise short-term rates for the first time in nearly a decade.
The average, 30-year fixed mortgage rate has risen to just a hair under 4 percent from 3.79 percent a month ago, according to mortgage buyer Freddie Mac.
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