The FINANCIAL — Rising home prices are starting to catch up with buyers and may be leading some to put off buying for a little longer, according to Nasdaq.
Existing home sales tumbled 4.8% in August to 5.31 million, the National Association of Realtors said on September 21, the steepest month-to-month decline since January, when they fell 4.9%. Economists surveyed by The Wall Street Journal had expected August sales would drop 1.1% to 5.53 million.
Behind the decline were particularly big drops in the West and the South, two areas where prices have risen particularly sharply. In the South, where the median home price is up 6% over a year ago, month-to-month sales fell 6.6% . And in the West, where the median price rose 7.1% over the year, sales were down 7.8%.
Nationwide, the median home price hit $228,700 in August, a 4.7% increase over a year ago.
Sales of single-family homes were down 5.3% in August while sales of condominiums and co-ops dropped 1.6%.
Analysts said they weren’t particularly troubled by the monthly decline, noting that year-over-year sales were up a robust 6.2%.
“Even with the decline, I believe we are comfortably set for the best home sales year in eight years,” said Lawrence Yun, chief economist at NAR.
Mr. Yun said a shortage of supply could be contributing to rising prices. The NAR estimates it would take 5.2 months to exhaust the existing inventory assuming a current sales pace, down from 5.6% one year ago.
J.P. Morgan economist Daniel Silver said he maintained “a relatively upbeat view on the housing market,” based on low inventory levels and a decrease in foreclosure sales.
“The August lull in existing home sales should prove short-lived because the fundamentals for housing remain highly supportive,” wrote Deutsche Bank economists Joseph LaVorgna, Brett Ryan and Aditya Bhave.
Gregory Daco, head of U.S. macroeconomics at Oxford Economics dismissed the August number as a ” hiccup” in a note to clients.
“Rising employment, slowly accelerating wage growth, rising housing demand, slowing home price inflation and mortgage rates at historical lows will underpin greater housing demand and in turn sales through the remainder of the year and into 2016,” he wrote.
Housing has been a bright spot this summer, with measures of home builder confidence and applications for building permits rising more than expected.
August housing starts, on the other hand, fell 3% from the previous month but analysts attributed the drop to the end of an affordable housing tax credit in New York rather than weakness in the market.
The Federal Reserve’s decision last week to hold rates steady at near-zero levels could give the housing industry an added boost in the coming months. Even when the central bank decides to raise rates, expected before the end of the year, the effect on mortgage rates and home sales will likely be modest, said Mr. Yun.
“We are not too concerned, even in a rising interest rate environment because there are many compensation factors,” he said.
Continued job growth and an easing of mortgage underwriting standards could attract more potential buyers into the housing market, he said.
According to Freddie Mac, the average 30-year fixed mortgage rate was 3.91% in August and Mr. Yun said he expected it to rise to 4.1% by the end of the year and to 5.0% by the end of next year.
Sales for July were revised down slightly to 5.58 million from 5.59 million.
News Corp, owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the National Association of Realtors.