U.S. home sales continued their sluggish pace in August, even as a late-summer decline in mortgage rates brought borrowing costs to a ten-month low. Existing home sales saw a slight decrease, marking the slowest sales activity since June, despite an annual increase compared to the previous year. The median sales price, however, reached its highest point for August on record, continuing a trend of year-over-year price growth.
Key Takeaways
- Existing home sales dipped 0.2% in August to a seasonally adjusted annual rate of 4 million units.
- The national median sales price rose 2% year-over-year to $422,600, the highest for an August since 1999.
- Mortgage rates fell to a ten-month low, but affordability remains a significant barrier for many buyers.
- Sales of new single-family homes saw a substantial jump, though they represent a smaller portion of the market.
- Inventory levels increased, leading to a more balanced market and longer selling times.
Persistent Slump Amidst Rate Fluctuations
The housing market has experienced a sales slump since 2022, largely attributed to the climb in mortgage rates from historic lows. While rates have been trending downward since late July, influenced by anticipated Federal Reserve actions, they remain a hurdle for many potential buyers. This is compounded by a significant increase in home prices over the past few years, with the median sales price now 52% higher than in August 2019.
Lawrence Yun, NAR’s chief economist, expressed optimism, noting that declining mortgage rates and increasing inventory are expected to stimulate sales in the coming months. Homes sold in August likely went under contract when 30-year mortgage rates were between 6.85% and 6.72%. The subsequent drop in rates, reaching as low as 6.26% recently, could encourage more activity.
New Homes Show Strength, But Overall Market Remains Constrained
In contrast to existing home sales, the market for new single-family homes demonstrated considerable strength. Sales surged by 20.5% in August from the previous month, reaching an annual rate of 800,000 units. This represents a 15.4% increase from the previous year, marking the strongest pace for new home sales this year. However, new home sales constitute a smaller segment of the overall housing market, which continues to be hampered by affordability issues and a chronic shortage of available homes, particularly in the lower price ranges.
First-time homebuyers, who historically make up a larger share of the market, are disproportionately affected. Their participation has fallen to 28% of sales, down from a historical average of 40%, as they lack the equity gains from previous home sales to put towards a new purchase.
Inventory Grows, Market Balances
The overall inventory of homes for sale has gradually increased as the market has cooled. At the end of August, there were 1.53 million unsold homes, an 11.7% rise from the previous year. This translates to a 4.6-month supply at the current sales pace, inching closer to the 5- to 6-month supply considered a balanced market. Homes are also taking longer to sell, with properties remaining on the market for an average of 31 days, up from 26 days a year ago. This trend is putting pressure on sellers to offer better deals, with over 20% of August listings seeing price reductions. Economists anticipate that continued easing of mortgage rates could further boost buyer interest, potentially leading to a more active fall season, though rates are generally expected to remain above 6% for the remainder of the year.