U.S. home resales surprisingly plunged in August after investors exited the market, though the decline may be temporary.
The National Association of Realtors announced on Monday that existing home sales fell 1.8 percent to an annualized pace of 5.05 million units. This was the first decline in four months, though this was the second highest sales rate this year so far.
“There is no fundamental economic weakness story in the fall. Maybe investors are leaving the market because home prices are too high and (there are) no more bargains to be had,” Chris Rupkey, a New York-based chief financial economist at MUFG Union Bank, told Reuters.
Analysts had expected sales to jump to 5.20 million-unit rate. In comparison to August 2013, sales fell 5.3 percent.
Buyers had supported the market by purchasing properties in distress and reconfiguring them into rental property. However, in August, such investors totaled 12 percent of the purchases done, the lowest level since November 2009.
While purchases by first-time home buyers slowed down in August, the declining number of investors translates into lesser bidding wars and more opportunities for normal buyers, which is expected to boost sales in the coming months.
Moreover, the improving labor market is expected to result in wage gains, which could enable potential buyers to acquire property.
A poll released last week indicated homebuilder confidence touched a nine-year high in September, with most builders noting that buyer traffic rose sharply. U.S. second-biggest homebuilder, Lennar Corp, disclosed that its orders surged 23 percent in the third quarter this year. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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