Existing home sales exceeded expectations in August, growing at a seasonally-adjusted monthly rate of 7.7 percent and year-over-year rate of 18.6 percent.
Existing homes include single family, town homes, condominiums and co-ops. For the Midwest, monthly sales were up 3.8 percent, and yearly sales rose 26.7 percent.
Lawrence Yun, the chief economist of the National Association of Realtors (NAR), said the data reflected a strong investor presence in the market.
“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,” Yun said. “Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation.”
Indeed, investors made up 22 percent of purchases in August, which is an 18 percent increase from July and a 21 percent increase from August 2010.
Both Yun and Ron Phipps, the president of the NAR, used the recent data to recommend policy changes for housing. Yun said that in the wake of Hurricane Irene, flood insurance has never been more important.
“About one out of 10 homes in this country need flood insurance to get a mortgage, and we would see significant negative market impacts without it,” Yun said, referring to the possible expiration of the National Flood Insurance Program.
For his part, Phipps said that credit must once again become accessible, as housing has entered a period of unprecedented affordability.
“All year, the relationship between home prices, mortgage interest rates and family income has been hovering at historic highs, meaning the best housing affordability conditions in a generation,” Phipps said. “The biggest factors keeping home sales from a healthy recovery are mortgages being denied to creditworthy buyers, and appraised valuations below the negotiated price. Buyers may be able to find more favorable credit terms with community and small regional banks, and Realtors can often give buyers advice to help them overcome some of the financing obstacles.”