U.S. Home Sales Fall in August

The newest set of data regarding market activity in August has arrived, and what it has to say might surprise you. Nationwide home sales fell throughout August, and while troublesome, this most recent drop may be an indication that more favorable conditions are yet to come.

A recent study from the National Association of Realtors has revealed that existing-home sales declined in August, dropping 1.8% month-to-month and a seasonally adjusted annual rate of 5.05 million. This was the first time in four consecutive months that existing-home sales declined, defying the expectation of a bump to 5.2 million.


Experts believe the drop in sales is largely a result of all-cash investors pulling out of the market – something we’ve seen throughout the year as increasing prices made available properties less attractive. Fewer distressed properties – such as those in foreclosure – only added to this problem.

In August, all-cash deals accounted for only 23% of the month’s total sales, the lowest share seen since 2009 and a drop of 6% from the month before. Similarly, purchases made by individual investors dropped to 12% in August, 4% below that of July and a 5% drop year-over-year.

Compared to one year prior, total sales dropped by 5.3% and homes are taking longer to sell. In the month of August, the average home sold within 53 days of entering the market, 5 days longer than July and 10 days longer than August 2013.

That being said, sales in August still remained higher than earlier in the year – an indication that not all hope should be lost just yet.

According to Lawrence Yun, NAR’s chief economist, “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.”

A lack of wage growth has certainly played a role in holding the market back this year, and considering the rate at which prices rose in 2013, it’s no surprise that many would-be buyers simply can’t afford a new home.

For many buyers though, this recent drop in investor activity will likely soon be rejoiced, as lessened competition will make it easier to purchase a home in upcoming months.

Do you think this drop in sales is a sign of a weakening market, or a natural sign of recovery? What are your thoughts?