Existing home sales turned up in August, with month-over-month gains across all regions. The National Association of Realtors (NAR) reported sales of existing homes rose 7.7% in August, to 5.03 million. This follows a period of decline, wherein existing home sales contracted 13.5% between January and July. On a year-over-year basis, existing home sales are 18.6% higher than the 4.24 million unit level in August 2010, courtesy of strong gains in the second half of 2010.
Gains were observed for both housing types and across all regions last month. Single-family home sales increased 8.5% to 4.47 million units, and condominium and co-op sales inched up 1.8% to 560,000 units. Across the regions, the West experienced a very strong rise, up 18.3% to an annual pace of 1.23 million units, more than recovering from the 12.6% decline registered in the previous month. Improvements were more modest elsewhere; increasing 5.4% in the South to 1.94 million, rising 3.8% in the Midwest to 1.09 million units and up 2.7% to 770,000 units in the Northeast.
The increase in home sales for August relates in part to an increase in purchases by investors, with investors’ share of sales jumping to 22% in August from 18% in July. The NAR notes, “Investors were more active in absorbing foreclosed properties. In addition to bargain hunting, some investors are in the market to hedge against higher inflation”. Purchases by investors have greatly influenced the level of existing home sales over the past year. As the chart below shows, total sales have typically moved in line with changes in investors’ share of home sales. With house prices are no longer falling, and the situation in the rental market firming in recent months, conditions are well suited to investors. We expect steady improvement in existing home sales over the remainder of the year and into 2012, which will be driven in part by further increases in investors’ share of existing home sales.