August Home Sales Maintain Near Recent Lows, Despite Continual Price Increase
Sales of pre-owned homes declined by 0.7% in August compared to July, resulting in a seasonally adjusted annualized rate of 4.04 million units, according to the National Association of Realtors. On a year-over-year basis, sales were down by 15.3% in August. This data reflects the closings for contracts likely signed in June and July when the average rate on the popular 30-year fixed mortgage was in the high 6% range. Towards the end of July, the rate increased to over 7%, negatively impacting affordability.
Lawrence Yun, the chief economist at the NAR, remarked that home sales have remained stable for several months without showing any significant increase or decrease. However, mortgage rate fluctuations will influence the short-term market, while job gains will have a steady and positive long-term impact.
In addition to higher interest rates, potential buyers are also facing limited housing inventory. By the end of August, only 1.1 million units were available for sale, reflecting a 0.9% decrease from the previous month and a significant 14% drop from the previous year. The current inventory represents a 3.3-month supply, suggesting a seller’s market. Experts consider a six-month supply as a balanced market condition for both buyers and sellers.
The limited supply has caused prices to rise significantly. The median price of homes sold in August was $407,100, indicating a 3.9% YoY increase and the highest reported price for the month of August.
Yun emphasized the need to double the housing supply in order to moderate these price surges. He noted that homeowners are in a favorable position, while Realtors, mortgage brokers, and renters face challenges and frustrations.
Sales have been weakest in the lower end of the market due to limited supply. While home sales decreased across all price points, they remained nearly unchanged for homes priced above $1 million. In fact, sales in this price range increased in both the South and the Midwest.
Danielle Hale, the chief economist at Realtor.com, highlighted that rising homebuying costs and decreasing rents have made renting more favorable in most of the largest metropolitan areas, including Austin, San Francisco, and even affordable markets like Columbus, Ohio.