Fewer Americans Buy Homes in August

Before you go, we thought you'd like these...
Before you go close icon
House Sale
Getty Images
By JOSH BOAK

WASHINGTON -- Fewer Americans signed contracts to buy homes in August, suggesting that real estate sales will remain sluggish over the next few months.

The National Association of Realtors said Monday that its seasonally adjusted pending home sales index fell 1 percent during the past month to 104.7. Higher prices and weak wage growth has limited buying, as the index is 2.2 percent below its level from a year ago.

The five-year recovery from the Great Recession has been uneven, such that historically low mortgage rates have failed to propel buying back to usual levels. Price increases going back to 2013 have led to fewer homebuyers, while many families have lacked the income to save for down payments. Investors making all-cash offers on homes have also begun to retreat, reducing the total number of sales.

Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.

The Realtors project that 4.94 million existing homes will be sold this year, down 3 percent from 5.09 million in 2013. Analysts generally associate sales of roughly 5.5 million existing homes with a healthy market.

August contracts fell in all four geographical regions -- Northeast, Midwest, South and West -- compared to the prior month. The index had registered overall gains in four of the previous five months.

Combined with homebuilders catering to higher-income buyers instead of the mass market, the contracts index points to trivial improvements in home sales in September.

"We hope this lost ground will be recovered gradually, but with investors disappearing from the market and homebuilders gaining market share from private sellers, it will take time," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

The housing rebound started to struggle in the middle of 2013. Mortgage rates started to rise from historic lows, even though they remain below their historic averages. Fierce winter storms delayed construction and slowed foot traffic at open houses at the beginning of 2014. Sales, however, never quite showed much strength during the summer buying season because wage growth has been so modest coming out of the downturn.

Purchases of existing homes fell 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August, the Realtors said last week. Sales fell from a July rate of 5.14 million, a figure that was revised slightly downward.

New-home sales did show greater strength in August, but they continue to be below the 1990s pace of more than 700,000 sales a year.

Sales of new homes climbed 18 percent last month to a seasonally adjusted annual rate of 504,000, although much of the gains were concentrated in the West. More importantly, 28 percent of the new homes sold in August cost more than $400,000, compared to just 18 percent a year earlier.

8 PHOTOS
Does Your Home Live Up to the American Average?
See Gallery
Fewer Americans Buy Homes in August
In 2013, the median lot size of a new sold single-family house was 8,596 square feet, or just under 0.2 acres. While that might not seem like a lot for you suburban homeowners, a regional breakdown shows that the small average size isn't due to urban inhabitants alone. The Northeast enjoys the largest average lot, at 13,052 square feet, while the less densely populated South and West lay claim to just 8,649 square feet and 6,796 square feet, respectively.
From a footprint of 1,650 square feet in 1978, the average American home has grown 50 percent, to 2,478 square feet. Yet tough times seem to be squeezing our expansionary attitude. Although new single-family homes sold in 2013 clocked in at a median 2,478 square feet, single-family homes completed in 2013 amounted to just 2,384 square feet. Homebuilder confidence has plummeted into pessimism in the last few months, hinting that the housing market's road to recovery might be rougher than expected.

While birth rates have held relatively steady for the past 40 years, everyone apparently needs more elbow room. The share of homes with four or more bedrooms has jumped from 27 percent in 1978 to 51 percent in 2013. And where would a bedroom be without a bathroom? While just 8 percent of 1978 homes had three or more baths, 37 percent of homes now fall in that category.

From 2008 to 2013, both the share of homes with four or more bedrooms and the share of homes with three or more bathrooms have jumped 10 percentage points, while median square footage is up 10.9 percent for the same period.
 

If there's one strong sign of new housing demand, it's home prices. After nose-diving during the Great Recession to a median sales price of just $216,700, home prices have been roaring back up. In 2013, the median sales price for a new single-family home was $268,900. But for those on the housing hunt, don't be discouraged. Home prices today still don't hold a candle to costs in 2006, according to the well-regarded Case-Shiller Home Price Index. In 2006, the index topped 200 before plummeting to less than 140, and current rates put the index just above 170.
It is America, after all. Our industrialized nation was built on the back of Henry Ford, and America is in no danger of breaking its automobile addiction. In 2013, a whopping 300,000 of the 429,000 new single-family homes sold included a two-car garage. And 98,000 new homes included a three-car garage -- the highest amount since 2007. Of all new homes built, only 10,000 failed to include a garage or carport.
American homebuyers are building bigger homes than ever before. But if there's one thing the recent recession has shown us, bigger isn't always better. Although 30 percent of Americans believe real estate is the best long-term investment, homeownership isn't for everyone. There are plenty of reasons to spend less or invest elsewhere -- and leave keeping up with the Joneses to Mr. and Mrs. Smith.
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION
Read Full Story

Find a New Home

Buy
Rent
Value
Powered by Zillow

From Our Partners