Existing home sales declined by 4.8% m/m in August, falling to 5.31 million units (annualized). The reading came in well below the consensus forecast, which called for a more modest pullback to 5.50 million. Revisions to the month prior were also slightly disappointing, with the initial reading of 5.59 million revised a touch lower to 5.58 million.
Sales declines were recorded across both segments, though the majority of the pullback in August was concentrated in single family (-5.3% m/m) homes. Sales of condos and co-ops (-1.6% m/m) declined less in August, after also pulling back the month prior.
"On a year-over-year basis, home prices were up by 4.7% - a modest deceleration from last month's reading of 5.8% y/y. Prices in the single family segment were up 5.1% y/y, while condo and co-op prices were up a more subdued 2.2% y/y",says TD Economics.
The share of distressed sales remained at 7%, unchanged from the month prior but a percentage point (pp) lower than year-ago levels. Shares of investor and all cash sales each declined by 1pp on the month, falling to 12% and 22%, respectively.
First-time home buyers accounted for 32% of the transactions in August, which is 4pp higher than the month prior and 5pp above levels this time last year.
The inventory of unsold homes - measured in months' supply - edged higher to 5.2 months (reported as 4.9 months in July).
In terms of the breakdown across regions, sales were down in the West (-7.8% m/m), South (-6.6% m/m), and Midwest (-1.5% m/m) but flat in the Northeast.
While the pullback in August sales was more severe than expected, it is largely consistent with the pending sales index which weakened over the summer from the red-hot pace experienced during the spring. Having said that, the pending index - which tends to lead existing home sales - did improve in July and remains 7.4% above last year's levels. This suggests that a existing home sales should continue to improve over the remainder of the year, building on the already significant progress seen through much of 2015.
The positive outlook is corroborated by the sharp increase in the share of first-time home buyers, which alongside the decline in investor purchases, suggests the rotation towards more traditional homebuyers continues to evolve. Admittedly, this process has proven to unfold at a slower pace than expected, likely exacerbated by elevated levels of student debt holdings and stagnant wage growth - both of which have made it increasingly more difficult for the would-be first-time homebuyers to save.
"Affordability remains healthy across many U.S. markets. Affordability should continue to be supported by mortgage rates which are expected to remain low even after the Fed begins to normalize interest rates, a slowing pace of home price growth, and an acceleration in income gains that should manifest as the jobless rate nears its natural level", added TD Economics.
