U.S. Sales of Existing Homes Unchanged, Trailing Estimates

Sales of previously owned U.S. homes were unchanged in August, indicating buyers are balking at higher prices and leaving more inventory on the market for the first time in three years, a National Association of Realtors report showed Thursday.

Contract closings were unchanged from the prior month at a 5.34m annual rate (est. 5.37m); follows four straight declines. Median sales price increased 4.6% y/y to $264,800. Inventory of available properties rose 2.7% y/y to 1.92m, which was the first increase in more than three years.

Borrowing costs have risen this year and property price gains — while moderating — continue to outpace wages amid a persistent shortage of available listings. Those affordability hurdles are especially burdensome for younger prospective buyers looking for their first homes.

Buyers are getting help from a steady job market and healthier finances. While overall consumer confidence remains elevated, the latest University of Michigan report showed Americans see home buying conditions as less favorable than a few years ago.

“There are buyers on the sidelines” ready to re-enter the market, Lawrence Yun, NAR’s chief economist, said at a press briefing accompanying the report. “The housing market can turn for the better” as long as inventory continues to rise, he said.

Homebuilding also is struggling to pick up steam, government data showed Wednesday. While housing starts rose, permits — a proxy for future construction — fell to the slowest pace since May 2017, with single-family authorizations dropping the most in seven years.

“We’re seeing buyers be really reluctant and shying away from making a purchase commitment right away,” said Cheryl Young, a senior economist at real-estate data provider Trulia in San Francisco. “The tide is maybe turning a bit.”

The failure of existing home sales to rebound in August is another sign that residential investment will slow in the third quarter after subtracting from growth in the first half of the year. In addition to supply constraints, a new trend of weaker demand is emerging, reflected in falling home-buying sentiment. An pop in fourth-quarter home sales will likely be modest and fail to push the overall pace of residential investment for the year into positive territory.