Sales of existing homes unexpectedly declined in August

A Remax "For Sale" sign stands in front of a house in Miami. CREDIT: Bloomberg News photo by Luke Sharrett).

Sales of previously owned U.S. homes unexpectedly declined to a six-month low in August, signaling buyers are getting discouraged by a limited selection of properties that’s kept prices high, National Association of Realtors data showed Thursday.

Key points:

– Contract closings fell 0.9 percent to a 5.33 million annual rate (forecast was 5.45 million).

– Sales rose 7.3 percent from August 2015 before seasonal adjustment.

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– Median price of an existing home increased 5.1 percent from August 2015 to $240,200.

– Inventory of available properties fell 10.1 percent from a year earlier to 2.04 million, the fewest homes since March.

Big picture:

A shortage of available properties for sale continues to hinder the market, the report showed, with inventories on a year-over-year basis falling for a 15th straight month in August. Even with the moderation in purchase activity last month, the repeat sales market is expected to grow this year amid steady hiring and borrowing costs that are still near record lows. Faster wage growth along with more listings and construction of entry-level properties would help provide a bigger boost to the housing recovery.

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Economist takeaways:

The slowdown “is somewhat surprising given the broader economy is creating jobs,” Lawrence Yun, chief economist at the Realtors group in Washington, told reporters as the figures were released. “Inventories is the key factor that is missing in this housing market recovery.” If more inventory comes back on line with the help from builders, the housing recovery can move forward, he said.

“The underlying pace is relatively steady,” said Omair Sharif, senior U.S. economist at Societe Generale in New York. Low inventory, low credit availability and tough affordability for first-time buyers remain “headwinds for the housing market, and it’s hard to see home sales accelerating a whole lot from here.”

“Given the inventory shortage in most markets, new listings at affordable prices are receiving multiple offers and going under contract almost immediately,” NAR president Tom Salomone, a broker-owner of Real Estate II Inc. in Coral Springs, Florida, said in a statement.

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The details:

– Sales dropped in three of four regions, including a 2.7 percent decrease in the South and a 1.6 percent decline in the West.

– At the current pace, it would take 4.6 months to sell the houses on the market, down from 4.7 months in July; the Realtors group has said that less than a five months’ supply represents a tight market.

– Properties were on the market for 36 days, compared with 47 days a year ago

– Single-family home sales decreased 2.3 percent to an annual rate of 4.7 million while purchases of condominium and co-op units rose 10.5 percent to a 630,000 pace.

– First-time buyers accounted for 31 percent of all sales, compared with 32 percent the prior month.