With prices of existing homes on the rise, buyers become wary and play the "wait and see" game.
Sales of existing homes, according to the National Association of Realtors, have dropped by 4.8 percent in August to 5.31 million. In a report by The Wall Street Journal, it is said to be the steepest decline since January when it fell down 4.9 percent. Economists who were surveyed expected sales to drop by 1.1 percent to 5.53 million. The number one reason for the drop can be found in the South and West wherein prices have really spiked. The South experienced a 6 percent increase in home prices saw sales drop by 6.6 percent while in the West, a 7.1 percent price increase caused sales to dive down by 7.8 percent.
According to Market Watch, in July, sales registered the highest since the recession due to low mortgage rates and increase of jobs that are giving people more buying power. And over the last year, sales have also jumped 6.2 percent which led experts to bet on a strong demand that will continue until 2016. This, despite the fact, that interest rates are foreseen to rise significantly. Gregory Daco, U.S. Macroeconomics head, said to his clients, "Despite this monthly hiccup, the outlook for sales activity remains bright."
In the same report by Market Watch, realtors have been working hard in the last few years but sales have been dismal and are seen as unlikely to go back to the same levels before the recession. One reason cited is the lack of supply of properties being put up for sale. There were 2.29 million homes placed on the market in August which basing on current trends is over five months of supply. With supply running low, the prices of existing homes shot up to an average of $228,700 in August. It is a 4.7 percent increase compared to last year and it is one reason why buyers are staying put with their money.