By Mike Colpitts
Home sales soared by lucky numbers in August, rising 7.7% to a seasonally adjusted annual rate of 5.03 million units, despite a tough economy, according to the National Association of Realtors. The jump in existing sales is a positive sign for the economy, which has been battling to recover from its downturn.
The rate of exisiting home sales is also higher than last year, which soared 18.6% on an annualized basis from 4.24 million units in August 2010.
Investors accounted for nearly one-in-four purchases during the month (22%) as lower home prices and record all-time low mortgage rates drove an increase from 18% in July. The run-up in investor buying, however, was off-set by another increase in purchases by first time buyers, who made 32% of home purchases during the month.
Home sales have been heavily dependent on first time buyers and investors in the current marketplace with few move-up buyers able to make purchases. First time buyers made up 31% of purchases for August 2010, a year ago.
All cash transactions accounted for 29% of purchases in August, which was identical to July and close to year ago levels (28%). Investors pulling their cash out of other investments like stocks and other financials make up the highest percentage of all cash purchases.
“Investors were more active in absorbing foreclosed properties,” said Lawrence Yun, NAR chief economist. “In addition to bargain hunting, some investors are in the market to hedge against higher inflation.
“We had some disruptions from Hurricane Irene in the closing weekend of August, when many sales normally are finalized, along the Eastern seaboard and in New England ,” Yun said. “As a result, the Northeast saw the smallest sales gain in August, and some general impact is expected in September with widespread flooding from Tropical Storm Lee. Aberrations in housing data are possible over the next couple months as markets recover from disrupted closings and storm damage.”
Record low mortgage rates in September may send home sales even higher during the month. The conventional 30-year fixed rate loan fell to an average of 4.27% in August, down from 4.55% in July, and then dropped to a low of 4.12% in September. Rates on accompanying 15-year fixed rate loans and adjustable rate mortgages remain near record all-time lows as lenders try to attract more mortgage buying activity.