Sales of previously owned homes fell in August to the lowest level in a year, reflecting a shortage of properties on the market and a sharp drop in Houston home purchases because of Hurricane Harvey.
Existing-home sales declined 1.7% from a month earlier to a seasonally adjusted annual rate of 5.35 million, the National Association of Realtors said Wednesday. That marked the third straight monthly drop, with continued declines expected in the coming months. Sales rose just 0.2% over the 12 months ending in August.
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Economists said that while demand remains strong, sluggish new construction and the reluctance of owners to put their homes on the market means there simply isn't much to buy.
"Given the strength of the job market, favorable demographics and rock-bottom mortgage interest rates that make buying a home very affordable, the existing-home sales market should be roaring instead of whimpering," said Svenja Gudell, chief economist at real estate data provider Zillow.
Existing home sales remain about 82% of what they would normally be, accounting for population growth, according to an analysis by home tracker Trulia.
The year started strongly, with many economists predicting that rising home prices and a strengthening economy would prompt more sellers to put their homes on the market. Instead, the number of homes for sale at the end of August declined 2.1% from a month earlier and is 6.5% lower than a year ago.
"We had high hopes beginning the year but those have been smashed with a steel-toed boot," Ms. Gudell said.
Lawrence Yun, the Realtors' chief economist, now projects that sales for all of 2017 will decline from 2016, largely because of hurricanes Harvey and Irma, which have slowed sales in the South.
Hurricane Harvey packed an additional punch to the housing market in August, as buyers battling historic floods were in no position to close on home purchases. Sales in Houston plunged 25% in August, which was the first decline in almost a year, the Houston Association of Realtors said last week.
"Home sales were humming throughout the first three weeks of August, but the moment Harvey struck the region, everything came to a screeching halt," Cindy Hamann, chair of the Houston Association of Realtors, said in a release last week.
Mr. Yun estimated that overall sales would have been flat from the previous month without the hurricane effects.
Economists said the impact of both Harvey and Hurricane Irma will continue to play out over the next couple of months. But most said they expect the Houston market to recover after that.
"We would expect to see a significant decline in home sales or closings for a couple of months, but if Katrina is any example it rebounds very strongly when things get back to normal," said Mark Fleming, chief economist at First American Financial Corp.
Others were less sanguine. "Once the damages are fully assessed, people are really going to start to realize how susceptible a large investment is going to be to these kinds of disasters," said Cheryl Young, a senior economist at Trulia.
Mr. Yun said broader factors are weighing on the market. Inventory remains tight, in part because of lackluster home construction, and that has contributed to a run-up in home prices, pricing out potential buyers.
The median price of homes sold last month reached $253,500, up 5.6% from a year earlier. That was more than double the growth in Americans' incomes.
It has gotten easier to get a mortgage in recent months, but Sanjiv Das, chief executive of Caliber Home Loans, said he still encounters many would-be purchasers who struggle to get conventional loans because their credit was bruised during the recession.
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(END) Dow Jones Newswires
September 20, 2017 12:33 ET (16:33 GMT)