Today, the NAR reported that sales of existing homes dropped 2.7% month-over-month in August. Consensus expectations were for home sales to rise 2% in August.
After last month’s bullish new home sales data, we had to take a step back and question the sustainability of the improving housing trends when most consumers continue to suffer. Clearly, the one big sticking point continues to be high unemployment, which puts real consumer demand in question.
The slowdown in August (which will likely continue into September) can be attributed to a couple of reasons. First, we are past the home sales PEAK SEASON (for those consumers with “need based” moves). Second, the NAR said “first-time” buyers purchased 30% of homes in August which remains unchanged from July. To that end, it appears that the Government home-buyer stimulant is ending and having less of an impact on sales trends.
Given the time it takes to buy a new home, it’s less likely that “first time” buyers are going to close in time to take advantage of the Government subsidy. Therefore, as a % of total buyers, “first time” buyers are going to fall off rather significantly in the coming months.