September 22, 2011 (Chris Moore)
Distressed property sales were almost 7 percent higher in August than July and investors came out in force to scoop them up, helping existing home sales to post a 7.7 percent gain according to the National Association of Realtors (NAR).
Investors accounted for 22 percent of all purchase activity in August, up from 18 percent in July, as distressed property sales increased to 31 percent of all homes sold, an increase of 6.9 percent over July.
As a consequence of the deep discounts that distressed properties typically sell for, median home prices continued to decline, falling to an average of $168,300 in August, down from $174,000 in July. The national median home price was also 5.1 percent lower than August 2010.
Total existing home sales, which include single-family homes, townhomes, condos, and co-ops, sold at a seasonally adjusted rate of 5.03 million in August, up from a revised 4.67 million in July. Sales were 18.6 percent higher than the 4.24 million units sold in August 2010 which was primarily due to home sales last year suffering from the hangover caused by the expiration of the home buyer tax credit.
Lawrence Yun, chief economist at NAR, stated, “Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations. Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation.”
Purchase cancellations, which first spiked in June, continued to be a source of concern in August as cancellations caused by declined mortgage applications and low appraised values increased even higher from 16 percent in July to 18 percent in August.
Regionally, existing home sales in the Northeast increased 2.7 percent to an annual pace of 770,000 sales in August and are 10.0 percent higher than August 2010, while existing home sales in the Midwest rose 3.8 percent to a level of 1.09 million sales and are 26.7 percent above year ago levels.
In the South, existing home sales increased 5.4 percent to an annual level of 1.94 million sales in August and are 16.9 percent above August 2010 levels, and in the West, existing home sales increased 18.3 percent to an annual rate of 1.23 million sales in August and are 13.0 percent below year ago levels.
The median price in the Northeast was $244,100, a decline of 5.1 percent from a year ago, while the median price in the Midwest was $141,700, down 3.5 percent from August 2010.
The median price in the South was $151,000, a decline of 0.8 percent from a year ago and in the West the median price was $189,400, down 13.0 percent from August 2010.
Tags: NAR, existing home sales, investors, distressed property sales, declining prices, low appraisals, cancelled contracts, median home price