WASHINGTON -- Fewer Americans signed contracts to buy homes in August, suggesting that real estate sales will remain sluggish over the next few months.
The National Association of Realtors said Monday that its seasonally adjusted pending home sales index fell 1 percent over the past month to 104.7. Higher prices and weak wage growth have limited buying, as the index is 2.2 percent below its level from a year ago.
"Housing overall is growing, but it plunged in the recession and it's never really started to resurge," said David Sloan, a senior economist at 4Cast Inc. in New York.
The five-year recovery from the recession has been uneven, and historically low mortgage rates have failed to propel buying to usual levels. Price increases going back to 2013 have led to fewer homebuyers, while many families have lacked the income to save for down payments. Investors making all-cash offers on homes have also begun to retreat, reducing the total number of sales.
Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.
The Realtors project that 4.94 million previously owned homes will be sold this year, down 3 percent from 5.09 million in 2013. Analysts generally associate sales of roughly 5.5 million previously owned homes with a healthy market.
August contracts fell in all four geographical regions -- Northeast, Midwest, South and West -- compared with the previous month. The index had registered overall gains in four of the previous five months.
Combined with homebuilders catering to higher-income buyers instead of the mass market, the contracts index points to trivial improvements in home sales in September.
"We hope this lost ground will be recovered gradually, but with investors disappearing from the market and homebuilders gaining market share from private sellers, it will take time," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The housing rebound started to lag in the middle of 2013. Mortgage rates began to rise from historic lows, even though they remain below their historic averages. Fierce winter storms delayed construction and slowed foot traffic at open houses at the beginning of this year, and sales never showed much strength during the summer buying season because wage growth has been modest coming out of the downturn.
Purchases of previously owned homes fell 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August, the Realtors said last week. Sales fell from a July rate of 5.14 million, a figure that was revised slightly downward.
New-home sales did show greater strength in August, but they continue to be below the 1990s pace of more than 700,000 sales a year.
Sales of new homes climbed 18 percent last month to a seasonally adjusted annual rate of 504,000, although much of the gains were concentrated in the West. More importantly, 28 percent of the new homes sold in August cost more than $400,000, compared with just 18 percent a year earlier.
A sustained pace of hiring may help lift home sales through year's end. Employers have added an average 215,380 to payrolls a month so far this year, the strongest pace since 1999. Economists project job gains to average 216,000 for all of 2014, according to the median in a Bloomberg survey conducted Sept. 5-10. The Labor Department will release September figures on Friday.
Young Americans, burdened with having to repay school loans, are among those who will benefit most from an improving job market, the real estate agent's group said.
"Jobs and income gains will help repay student debt and better position first-time buyers, setting the stage for improved sales growth in upcoming years," National Association of Realtors chief economist Lawrence Yun said in a statement.
Information for this article was contributed by Josh Boak of The Associated Press and Michelle Jamrisko of Bloomberg News.
Business on 09/30/2014