NAR: Investors Clear the Way for First-Time Buyers

by James F. McClister

September 23, 2014

NAR’s August existing-home sales report reveals declines – the good kind.

The second quarter of 2014 saw consecutive months of gains, and it looked like that trend was continuing into the third quarter. However, due to a increasing lack of interest from all-cash investors, existing-home sales in August slipped, according to the National Association of Realtors.

The association’s report revealed that total existing-home sales, considering transactions of all property types – single-family homes, townhomes, condominiums and co-ops – decreased 1.8 percent to a seasonally adjusted annual rate of just over 5 million.

NAR researchers say that sales are still at the second-highest pace of 2014, but remain 5.3 percent behind figures from August 2013.

And the North Prevails

While the overall decreases reflect the condition of the national market, NAR also examined the performance of the four regional markets, finding that:

In the Northeast, existing-home sales leaped 4.7 percent to an annual rate of 670,000, but remain 4.3 percent below last August’s levels.
In the Midwest, existing-home sales rose 2.5 percent to an annual rate of 1.24 million, but remain 3.9 percent below last August’s levels.
In the South, existing-home sales declined 4.2 percent to an annual rate of 2.03 million. Levels remain 4.2 percent below last August.
In the West, existing-home sales declined 5.1 percent to an annual rate of 1.11 million. Levels remain 9.8 percent below last August.

Shedding Investors Could Be a Good Thing

While sales activity did diminish in August, it’s not all necessarily bad. Both NAR President Steve Brown and the group’s chief economist Lawrence Yun agree that the fall in sales is the result of decreased investor interest, which could help decongest avenues to homeownership in competitive markets.

“There was a marked decline in all-cash sales from investors,” Yun says. “On the positive side, first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”

So long as job growth and wages continue to improve, Yun adds, pent up demand in the truly competitive markets, like Houston, can begin easing, making it ultimately more appealing for buyers dependent on financing to purchase.