Sales of previously owned homes fell 2.5% in August compared to July, reaching a seasonally adjusted annualized rate of 3.86 million units, according to the National Association of Realtors (NAR). This decline slightly underperformed analysts’ expectations and marked a 4.2% decrease compared to August 2023. It is the third consecutive month where home sales remained below the 4 million annualized mark.
The reported figures are based on closings, which reflect contracts likely signed in late June and July. During that period, mortgage rates began to decrease, though they remained above their current levels. In mid-June, the average rate for a 30-year fixed mortgage was just over 7%, and by the end of July, it had dropped to 6.7%.
NAR’s chief economist, Lawrence Yun, expressed optimism despite the disappointing sales figures in August. He pointed out that the combination of lower mortgage rates and increasing housing inventory creates favorable conditions for potential sales growth in the coming months. However, Yun cautioned that the entire home-buying process, from the initial search to closing, typically takes several months to complete.
The inventory of homes for sale improved slightly, with 1.35 million units available at the end of August, a 0.7% increase from July and a 22.7% rise year-over-year. Despite the uptick, the market remains tight, with just a 4.2-month supply of homes. A balanced market between buyers and sellers is generally considered to have a six-month supply of homes. Tight inventory continues to keep upward pressure on home prices, giving sellers the advantage in certain markets, particularly in regions like the Northeast, where supply remains scarce.
In August, the median price of an existing home reached $416,700, a 3.1% increase from August 2023, setting a record high for the month. However, this median figure reflects higher-priced homes driving the market, as sales surged for homes priced above $750,000 but declined for homes under $500,000.
First-time homebuyers made up only 26% of August’s sales, matching a record low set in November 2021. Meanwhile, all-cash sales represented 26% of total sales, slightly lower than last year but still historically high. Mortgage rates continued to decline in August and September, with the 30-year fixed rate now at 6.15%, the lowest level in approximately two years. This could provide further relief for prospective buyers as the market stabilizes in the coming months.
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