Market Report: Home Prices Maintain Upward Trend Despite Decrease in Sales
Home prices continued to rise in August despite a drop in home sales. This can be attributed to the limited availability of homes for sale, which has driven prices up, and the persistently high mortgage rates that are deterring potential buyers. According to the National Association of Realtors’ monthly report, the median price for existing homes, including single-family homes, townhomes, condominiums, and co-ops, reached $407,100 last month. This represents a 3.9% increase compared to the median home price of $391,700 a year ago. The report also revealed price increases in all four regions of the country: Northeast, Midwest, South, and West.
Prior to August, home prices had been declining on a year-over-year basis for five months. However, in July, prices rebounded and continued to rise in August. In fact, August recorded the highest median price for this month on record and the fourth highest median price for any month. Furthermore, August marked the third consecutive month with a median sales price exceeding $400,000.
Although home prices experienced a surge during the pandemic, they have since cooled off for several months. Nevertheless, the limited inventory of homes for sale continues to drive prices higher as buyers compete for the few available properties in each local market.
By the end of August, the inventory of unsold existing homes had decreased by 0.9% compared to the previous month, resulting in 1.1 million units available for sale. This is equivalent to a 3.3 months’ supply based on the current monthly sales pace.
Given the scarcity of homes on the market, the upward trajectory of home prices, and the elevated mortgage rates throughout the summer, completed sales in August (likely contracted in June or July) fell short of expectations. Sales of existing homes decreased by 0.7% from July to August, reaching a seasonally adjusted annual rate of 4.04 million units. Analysts had anticipated a 1.5% increase and a sales pace of 4.10 million.
Compared to the previous year, August sales were down by 15.3%, as the sales pace in August 2020 reached 4.77 million units.
Lawrence Yun, Chief Economist at the National Association of Realtors, commented on the situation, stating, “Home prices continue to rise despite lower home sales. To moderate home price gains, the supply needs to essentially double.”
The current state of the housing market reflects the challenging dynamics of limited supply, escalating home prices, and persistent mortgage rates. These factors contributed to the decline in home sales in August.