Buyers fearing an interest rate hike in September expedited home purchases in June and July, resulting in a modest late-summer slump in August. Many homebuyers anticipated the Fed to lift the federal funds rate in September, which created urgency in the housing market. As that demand was realized earlier in the year, sales in August decreased to an annual rate of 5.3 million homes, down from 5.6 million homes in July. A combination of higher prices and low supply also weighed on sales, and the end of the summer buying season will likely stabilize activity in the upcoming months.
According to the National Association of Realtors, the median home price in August was $228,000, up 4.7 percent from the same month last year. However, the median price was down from July’s level of $234,000, which could be indicative of pricing pushback. The pace of annual gains has been slowing steadily in 2015 as elevated prices move some buyers to the sidelines. Little relief on prices is anticipated from new supply as housing starts hover at relatively low levels.
First-time buyer participation rebounded to 32 percent in August, up from 28 percent in July. The rate has averaged in the low-30 percent area for most of this year and rising interest rates could prevent many buyers from entering the market in the near term. The price of both traditional and investment homes have plateaued in recent months as sellers are finding fewer buyers both willing and able to acquire homes.
New-home sales jumped in August, bucking the trend in the existing-home sales. The Department of Commerce reported a 5.7 percent rise in sales of newly built homes to an annual rate of 552,000 houses. The prevalence of available inventory was one of the major reasons for the rise. As buyers attempted to lock in interest rates, they turned to neighborhoods where inventory was coming out of the ground. As a result of the FOMC delaying an interest rate hike in September, sales of new homes are anticipated to remain healthy beyond the summer buying season.
Sources: HomeUnion Research Services, Department of Commerce, National Association of Realtors