NAR Stumped As Existing Home Sales Slide Continues; Lack Of Household Income Growth Blamed

Tyler Durden's picture

fter last month's unexpected, dramatic 3.4% drop, and 1.64% Y/Y decline - the first annual decline since November 2015 - the weakness in exiting home sales continued today, when the NAR reported that in July sales of existing homes dropped another -0.9% from a downward revised 5.38MM to 5.33MM, missing expectations of a rebound to 5.45 million.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 0.9 percent to a seasonally adjusted annual rate of 5.33 million in August from a downwardly revised 5.38 million in July. After last month's decline, sales are at their second-lowest pace of 2016, but are still slightly higher (0.8 percent) than a year ago (5.29 million).

As the NAR reported, existing-home sales eased up in August for the second consecutive month despite mortgage rates near record lows as higher home prices and not enough inventory for sale kept some would-be buyers at bay. Only the Northeast region saw a monthly increase in closings in August, where inventory is currently more adequate. Some of the key details from the report: 4.6 months supply in Aug. vs. 4.7 in July. Inventory fell 3.3% to 2.04m homes. First time buyers comprised 31% of total sales; all cash were 22%; investors represented 13% while distressed sales were 5% of total sales

Even the traditionally cheerful Lawrence Yun, NAR chief economist, was perplexed and said that recent job growth is not yielding higher home sales. "Healthy labor markets in most the country should be creating a sustained demand for home purchases," he said. "However, there's no question that after peaking in June, sales in a majority of the country have inched backwards because inventory isn't picking up to tame price growth and replace what's being quickly sold."

Added Yun, "Hopes of a meaningful sales breakthrough as a result of this summer's historically low mortgage rates failed to materialize because supply and affordability restrictions continue to keep too many would-be buyers on the sidelines."

The median existing-home price for all housing types in August was $240,200, up 5.1% from August 2015 ($228,500). August's price increase marks the 54th consecutive month of year-over-year gains.

Furthermore, with new home builders focusing on rental properties, total housing inventory at the end of August fell 3.3 percent to 2.04 million existing homes available for sale, and is now 10.1 percent lower than a year ago (2.27 million) and has declined year-over-year for 15 straight months. Unsold inventory is at a 4.6-month supply at the current sales pace, which is down from 4.7 months in July.

The share of first-time buyers was 31 percent in August, which is down from 32 percent both in July and a year ago. First-time buyers represented 30 percent of sales in all of 2015.

What was more ironic is that not even the NAR is able to reconcile the recent political propaganda about "soaring" household income with muted homebuying activity:

"It's very concerning to see that inventory conditions not only show no signs of improving but have actually worsened in recent months from their already suppressed levels a year ago," said the NAr's Larry Yun. "While recent data from the U.S. Census Bureau shows that household incomes rose strongly last year, home prices are still outpacing incomes in many metro areas because of the persistent shortage of new and existing homes for sale. Without more supply, the U.S. homeownership rate will remain near 50-year lows."

Properties typically stayed on the market for 36 days in August, unchanged from July and down considerably from a year ago (47 days). Short sales were on the market the longest at a median of 144 days in August, while foreclosures sold in 42 days and non-distressed homes took 35 days. Forty-six percent of homes sold in August were on the market for less than a month.

NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida, says in today's fast-moving market, a Realtor® who knows about down payment options4 and their target area is essential to a successful buying experience. "Given the inventory shortages in most markets, new listings at affordable prices are receiving multiple offers and going under contract almost immediately upon becoming available," he said. "Home shoppers serious about buying need to be ready with a pre-approval. This allows a Realtor® to hone in only on homes within the buyer's price range and ensures any offer presented to the seller is taken seriously."

The regional breakdown:

  • August existing-home sales in the Northeast jumped 6.1 percent to an annual rate of 700,000, which is unchanged from a year ago. The median price in the Northeast was $274,100, which is 0.8 percent above August 2015.
  • In the Midwest, existing-home sales decreased 0.8 percent to an annual rate of 1.27 million in August, but are still 0.8 percent above a year ago. The median price in the Midwest was $190,700, up 5.5 percent from a year ago.
  • Existing-home sales in the South in August fell 2.7 percent to an annual rate of 2.16 million, but are still 0.9 percent above August 2015. The median price in the South was $209,700, up 6.7 percent from a year ago.
  • Existing-home sales in the West lessened 1.6 percent to an annual rate of 1.20 million in August, but are still 0.8 percent higher than a year ago. The median price in the West was $347,400, which is 9.2 percent above August 2015.

Alas, with the Fed only targeting the stock market now, it is unlikely that this trend will change any time soon.

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Hohum's picture

Household incomes are booming, the Census told me so.

TrajanOptimus's picture

Prices in our area have declined 8% in the last 3 months. 81 new listings the last week, 76 existing listings having price reductions. Our population is about 100K....

If you have an investment property, you better start to think about selling it.

It's a fact that when interest rates go up, home prices fall. Buy a primary residence once prices have fallen just before a rate hike. The market will anticipate a rate increase prior to the rate increase. That is a good time to lock in a rate and buy a primary residence.

Timing is everything.

Paul Kersey's picture

Lack of inventory has been pushing prices up too high for the stagnant wage buyer. The lack of available lots has been pushing up the costs of new homes. More supply, less demand and higher wages would get sales moving again, but we we never see higher wages, as automation continues to eliminate jobs.

DocBerg's picture

It is not just the lot prices causing the unaffordability of housing.  I recently tried to build a modular house on some rural property I own.  A 3 bedroom, 2 bath house on a basement, with an attached garage, built with all the cheapest contractor grade components, and without any fancy amenities, was priced at over $300,000.  This without the driveway, well, or septic system.  In the same area, it is possible to buy an existing home, with lots of amenities, on some acreage, for far less than this.  Of course, I would be taxed on the price of building the house, so I would get hit hard on that, too.  I don't know why it is this expensive to build a prefab house, but I expect that these prices will kill off a once thriving industry in the North Woods.

FireBrander's picture


The data is so bad, that the NAR is completely unable to spin it positively?

OMG, what's next from the NAR; "Now is not a good time to buy a house"?


A local Realtors "explanation" of why banks require so much paperwork and why that's good:

Paraphrasing: "Banks want to make sure you can repay the loan, and because of this caution, and the reduction in risk it produces, interest rates are at all time lows".

This from a "Professional Realtor".


A. Bank paperwork exists to prove you can make the payment NEXT MONTH (not for the next 30 years) so that they can sell your loan to an unsuspecting fool "reaching" for a return on thier money.

B. Rates are at "all time lows" because there is 'all time highs" of cheap money looking for a malinvestment.


ghostofelvis's picture

It takes more education to teach yoga than it does to become a REALTOR®.

darteaus's picture

Yes, but the logic of a realtor requires far more flexibility.

Muppet's picture

NAR data is false by/for idiots.   Its universally known to be bullshit.   Why waste time with meaningless crap?

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) TrajanOptimus Sep 22, 2016 10:14 AM

Why sell? If you need to relocate use a local property management company and convert to a rental. Rental prices continue to go higher!

Knowing your own long-term goals and being set up to make adjustments that benefit you (and not your local realtor or mortgage lender) are everything.

For any veterans out there, if you have not refi'd your mortgage, now would be a great time to do that. The great thing about a VA mortgage is that the interest rate/mortgage can be assumed by another veteran. When interest rates go up being able to offer another seller your low interest rate will be a great selling point.

Takeaction2's picture
Takeaction2 (not verified) Hohum Sep 22, 2016 10:05 AM

I was talking to one of my heavy hitter friends yesterday.  He owns one of the biggest real estate companies on the West Coast.  He said that he has never seen anything like it.  In the past 30 days, in Portland, Oregon, (The hottest market in the country) Home sales have gone "FRIDGED".  He said the market seems to have went cold over night.  Houses that people were fighting for several weeks ago are now sitting.  He has had deals canceling left and right.  Offers being retracted..  This is a very interesting situation.  Especially with Interest rates at 3.4%. 

S Spade's picture

everybody knows who "NAR" is right?  i can't stand writers who use less than widely know acronyms, without spelling it out on FIRST use.

buzzsaw99's picture

there will be a surge when the 10Y dives below 1%.

TradingTroll's picture

Right, because banks will lend more to risky homebuyers rather than park it at the Feds for a guaranteed return they have been increasingly doing during this slide in yield.

Got it!

Break_the_Bank's picture

NAR is stumped because they  drank their own cool aid. 

Squid Viscous's picture

Fuck you Larry you lying sack of shit DC whore

PTR's picture

Do you see what happens Larry?  

King Tut's picture
King Tut (not verified) Sep 22, 2016 9:37 AM

derp--lack of supply-derp

markitect's picture

"recent data from the U.S. Census Bureau shows that household incomes rose strongly last year"  

Bullshit.  My industry is deep into a new recession and my income is down 2 years in a row.  Shit started going sideways q4 2014 and got worse all through 2015 and has been dead in 2016.  We do Architecture and engineering for commercial and industrial clients and some residential.  If we have nothing in the hopper then expect this slow down to hit the construction trades about right now since theres a one year lag between design and construction.  Theres literally NO capex on the industrial side, no expansions, no special projects or upgrades.  We had one decent commercial office renovation in all of 2015 and 3 that never got past initial planning.  Businesses just arent spending and remain in defensive posture.

GunnerySgtHartman's picture

Agreed.  I'd like to know who (besides CEOs) is getting those strong household income increases.  I'm not seeing it, either.

markitect's picture

My wife has seen some decent raises but she works for a Chinese manufacturer in a US subsidiary selling cheap shit to Rite Aid, CVS, etc.  The cheap shit import import economy seems like all thats left.  Domestic is dead.

GunnerySgtHartman's picture

In my area, the hot segment is the $100k to $150k segment; existing homes in that range have contracts on them literally within hours of being put on the market.  Who's buying them?  Single people and retired couples.  Homes over $200k sit on the market for MONTHS, sometimes a year or more ... lots of tire-kickers but very few buyers, and then many of those who do buy over that price are able to get substantial (15-20% or more) breaks on the original asking price.

Not exactly a strong market, that's for sure.

MrBoompi's picture

If you had to put 20% down and declare your real income, like in the olden days, housing sales would come to a quick halt.  

Paul Kersey's picture

Without Government-back mortgages, housing sales would come to a halt.

Bam_Man's picture

People are obviously waiting for Negative Mortgage Rates.

chosen's picture

Lots of "Home for Sale" signs popping up where I live (SF Bay Area).   This means there are fewer buyers.  Most homes used to sell before signs were even put up.  The Chinese laundering money has apparently dried up and nobody in his right mind would buy at these bubble prices.  I would guess prices have peaked and the bubble is popping.

Consuelo's picture



Is it all due to a lack of buyers, or perhaps a few people with their ear to the ground...?

spekulatn's picture

Lawrence Yun, NAR chief economist............ is NOT peddling fiction. 

Things 'bout to get real, son.



darteaus's picture

Rent will be going up!

Bunga Bunga's picture

Simply the Chinese are not coming anymore. 

PTR's picture

That's what she said.

dunce's picture

It is doubtful that any government genersted data can be trusted as accurate and can be presumed to be skewed for political reasons.