WASHINGTON (Reuters) - U.S. home resales unexpectedly fell in August as investors stepped away from the market, but the decline probably does not signal renewed weakness.
The National Association of Realtors said on Monday existing home sales dropped 1.8 percent to an annual rate of 5.05 million units. The decrease was the first in four months, although the sales pace was still the second highest for the year.
“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,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
Economists had forecast sales increasing to a 5.20 million-unit pace. Compared to August last year, sales were down 5.3 percent.
Investors had propped up the market by snapping up distressed properties and converting them into rental units. But last month they accounted for only 12 percent of transactions, which was the smallest share since November 2009.
Although first-time buyers did not step up in August, the retreat by investors means fewer bidding wars and increased opportunities for ordinary buyers that could support sales going forward. In addition, a strengthening labor market is likely to culminate in faster wage growth, bolstering potential buyers.
Equities investors were not heartened, however. Housing shares fell on the data, underperforming the broader market. PulteGroup (PHM.N) dropped 2.12 percent, while KB Home (KBH.N) fell 2.48 percent and Toll Brothers (TOL.N) declined 2.27 percent. The dollar was little moved against a basket of currencies, while prices for U.S. Treasury debt were higher.
“This report indicates an orderly rotation in the distribution of the buyers’ profile from investors to first-time homebuyers, which we believe is a first crucial test of the sustainability of the housing recovery,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
A survey last week showed homebuilder sentiment hit its highest level in nearly nine years in September, with builders reporting a sharp pick-up in buyer traffic. Lennar Corp (LEN.N), the nation’s second-largest homebuilder, said its orders jumped 23 percent in the latest quarter.
The report on previously owned home sales showed all cash sales made up 23 percent of transactions in August, the smallest proportion since December 2009.
The share accounted for by distressed properties - foreclosures and short-sales - was the smallest since the Realtors group started tracking the series six years ago.
First-time buyers accounted for 29 percent of sales, well below the 40 percent to 45 percent that is considered by economists and real estate agents as ideal.
The inventory of unsold homes on the market increased 4.5 percent from a year-ago to 2.31 million in August.
At August’s sales pace, it would take 5.5 months to clear houses from the market, unchanged from July. A six months’ supply is viewed as a healthy balance between supply and demand.
The improving supply is restraining price increases. The median home price increased 4.8 percent from a year ago, slowing from the double-digit growth seen for much of 2013.
Slower price gains and a leveling off in mortgage rates from their peak last year should help support sales.
Reporting by Lucia Mutikani; Editing by Andrea Ricci