Sales of previously occupied U.S. homes remained sluggish in August, even as a late-summer slide in mortgage rates brought home loan borrowing costs to a 10-month low.
Existing home sales slipped 0.2% last month from July to a seasonally adjusted annual rate of 4 million units, the National Association of Realtors said Thursday. That’s the slowest sales pace since June.
Sales rose 1.8% compared with August last year. The latest sales figure topped the 3.96 million pace economists were expecting, according to FactSet.
The national median sales price increased 2% in August from a year earlier to $422,600. That’s the 26th consecutive month that home prices have risen on an annual basis and the highest median sales price for any August on data going back to 1999.
The U.S. housing market has been in a sales slump since 2022, when mortgage rates began climbing from historic lows. Sales of previously occupied U.S. homes sank last year to their lowest level in nearly 30 years. Through the first eight months of this year, home sales are down 1.2% compared to the same period last year.
Mortgage rates have been mostly declining since late July ahead of the Federal Reserve’s widely anticipated decision last week to cut its main interest rate for the first time in a year amid growing concern over the U.S. job market.
But while lower rates give home shoppers more purchasing power, borrowing costs remain too high for many Americans to afford to buy a home following years of skyrocketing home prices. Consider, the U.S. median home sales price is now 52% higher than it was in August 2019, before the housing market superheated during the initial years of the pandemic.
“However, mortgage rates are declining and more inventory is coming to the market, which should boost sales in the coming months,” said Lawrence Yun, NAR’s chief economist.
Homes purchased last month likely went under contract in June and July, when the average rate on a 30-year mortgage ranged from 6.85% to 6.72%, according to Freddie Mac. The decline in mortgage rates accelerated in August and this month, dropping the average rate as low as 6.26% last week.
Homebuilders have had success drumming up sales by lowering prices and offering incentives, including paying to lower mortgage rates for home shoppers who may not be able to afford to buy at current rates.
Sales of new single-family U.S. homes jumped 20.5% in August from the previous month to a seasonally adjusted annual rate of 800,000 units, the U.S. Census Bureau reported Wednesday. Sales were up 15.4% from a year earlier, the strongest pace so far this year, but are still running about 1.4% lower than a year ago.
However, new home sales are a small fraction of the overall housing market, which remains constrained by lack of affordability and a chronic shortage of homes for sale, especially those in the more affordable end of the market.
That trend has weighed especially on first-time homebuyers, who don’t have home equity gains to put toward a new home purchase. They accounted for 28% of homes sales last month. Historically, they made up 40% of home sales.
Still, the inventory of homes for sale across the U.S. has increased gradually as the market has slowed and is now at a level where supply and demand are more balanced.
There were 1.53 million unsold homes at the end of last month, down 1.3% from July and up 11.7% from August last year, NAR said. That’s still well below the roughly 2 million homes for sale that was typical before the pandemic.
August’s month-end inventory translates to a 4.6-month supply at the current sales pace, matching the supply level at the end of July and an increase from 4.2 months in August last year. Traditionally, a 5- to 6-month supply is considered a balanced market between buyers and sellers.
Homes are also taking longer to sell. Properties typically remained on the market for 31 days last month before selling, up from 26 days a year earlier, NAR said.
The longer homes linger on the market, the more pressure it puts on homeowners eager to sell to give buyers a better deal. That’s led to more sellers lowering prices.
A little over 20% of homes on the market in August had their initial listing price lowered, according to Realtor.com.
If mortgage rates continue to ease, that should help bring out more buyers, but economists forecasts generally call for the average rate on a 30-year mortgage to remain above 6% this year.
“Despite improvement, rates are still not low enough to unlock the vast majority of homeowners, who continue to enjoy sub 6% rates, but it will help those on the margins and may lead to a more active fall home sales season,” said Danielle Hale, chief economist at Realtor.com.
—Alex Veiga, AP business writer