Home sales fell 20% in August compared to last year

Existing home sales — which include single-family homes, townhouses, condominiums and co-ops — are down 19.9% ​​from a year ago and down 0.4% from July, according to a report from the National Association of Realtors.

Sales in August were at their weakest since May 2020, which was an anomaly because that was in the early days of the pandemic shutdown. Regardless, last month’s sales were the weakest since November 2015.

Year-on-year sales declines were observed in all price categories, with sharper declines at the lower end, and in all regions, they fell most in the West where affordability challenges are greatest.

Home prices continued to rise during the month, although it was the lowest year-over-year increase since June 2020. The median home price was $389,500 in August, up 7.7% from a year ago, according to the report. This is lower than the record high of $413,800 in June. The price increase indicates more than a decade of monthly gains on an annual basis.

“The housing sector is the most sensitive and exposed to the most immediate impacts from the Federal Reserve’s interest rate policy changes,” said Lawrence Yun, NAR’s chief economist. “Weak home sales reflect rising mortgage rates this year.”

The average 30-year fixed-rate mortgage rate reached 6% last week, its highest rate since 2008 and nearly double what it was a year ago.

Inventory is still tight

With sales down only slightly since July, the market slowdown may stabilize, assuming mortgage rates stabilize, Yoon said.

“But all bets are off if mortgage rates go up,” Yoon said. “Homeowners who have usually moved — because of a new job, another child, or because they are in a different school district — can stay in their current home because they like the lower interest rates they have already held for the past two and a half years.”

The “stay” effect is to keep the inventory of homes for sale tight. While it may seem that lower sales could mean an abundance of homes on the market, fewer people are moving their homes to the market. And new listings go really fast, going from listing to contract within 16 days.

The inventory of homes for sale at the end of August was down 1.5% from July and was unchanged from the previous year at 1,280,000 units. Homes are still selling quickly. At the current sales pace, it would take 3.2 months to sell all of that inventory, which is the same as July and up from 2.6 months a year ago, because there are fewer sales. Yoon said the balanced market is approaching 4 to 5 months.

“Inventory will remain tight in the coming months and even the next two years, increasing the need for more new home construction to boost supply,” Yoon said.

Home prices are easing

The market typically sees a seasonal decrease of about 1% per month in home prices during the summer, but these monthly declines are larger this year – down 3.6% in July compared to June, and a 2.4% decrease in August compared to June, although Local home prices are still higher than they were a year ago.

Yoon said some domestic markets may see declines on an annual basis.

But with the cost of home financing rising, buyers have to look at homes with much lower prices to keep payments affordable.

Yoon said if you bought a $300,000 home last year at a 3% interest rate, your monthly payment would be $1,265. In order to maintain the same monthly payment, they have to look at a house that is 30% lower today.

“This does not appeal to many buyers,” he said.

In August, first-time buyers were responsible for 29% of sales. This is the same as last month and a year ago.

“The number of first-time buyers is not rising,” Yun said. “The share should be above 30% or closer to 40%. But first time buyers really suffer, given the current affordability challenges.”

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