Pending home sales slowed in August, according to the National Association of Realtors.
NAR’s Pending Home Sales Index fell 1 percent to 104.7 in August from 105.8 in July, and is now 2.2 percent below August 2013 (107.1). Despite the slight decline, the index is above 100 – considered an average level of contract activity – for the fourth consecutive month and is at the second-highest level since last August.
All major regions experienced declines except for the West, which rose for the fourth consecutive month. In the Northeast, the pending sales index slipped 3 percent to 86.5 in August, but is still 1.6 percent above a year ago.
Lawrence Yun, NAR chief economist, said contract signings are holding steady and fewer distressed sales and less investor activity is likely behind August’s modest decline.
"Fewer distressed homes at bargain prices and the acknowledgement we’re entering a rising interest rate environment likely caused hesitation among investors last month," he said in a statement. "With investors pulling back, the market is shifting more towards traditional and first-time buyers who rely on mortgages to purchase a home."
According to NAR’s Profile of Home Buyers and Sellers, 81 percent of first-time buyers in 2013 who financed their purchase obtained a conventional or FHA loan1. Overall, first-time homebuyers have been less prevalent from the housing recovery, representing less than a third of all buyers each month for the past two years.
Yun says first-time buyer participation should gradually improve despite tight credit conditions and the inevitable rise in rates.
"The employment outlook for young adults is brightening and their incomes finally appear to be rising," said Yun in a statement. "Jobs and income gains will help repay student debt and better position first-time buyers, setting the stage for improved sales growth in upcoming years."
NAR projects that existing-homes sales will be down 3 percent this year to 4.94 million, compared to 5.09 million sales of existing homes in 2013. The national median existing-home price is projected to grow between 5 and 6 percent this year and 4 and 5 percent next year.
