Implications: After three consecutive months of gains, existing home sales took a breather to close out the summer as relatively tight inventories continue to restrict buyers' options. Sales of previously owned homes fell to a 5.31 million annual rate in August, a slower pace than any forecast from any economic group. However, you know we're in a housing recovery when sales can fall far short of expectations and still be up 6.2% from a year ago. We expect the rising trend to continue. All-cash buyers accounted for 22% of sales in August, down slightly from 23% a year ago. As a result, while total sales are up a healthy 6.2% from a year ago, non-cash sales (where the buyer uses a mortgage loan) are up 7.6%. So as all-cash sales eventually bottom out, total sales will start rising at a more rapid pace. The gain in mortgage-financed sales suggests a long-overdue thaw in lending. What's interesting is that the percentage of buyers using credit has increased as the Fed tapered and then ended QE. Those predicting a housing crash without more QE were completely wrong. According to a study released by the NAR earlier this month homebuilding activity continues to be insufficient in most metro areas and is contributing to the shortage of housing as well as the ongoing price gains we are seeing. However, the market will fix this problem. Higher prices should lure "on-the-fence" sellers into the market, boosting inventory, and increasing sales in the year ahead. The bottom line is that the trend in housing continues to be healthy and the plow horse continues to march on.
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