August sales of previously owned homes fell 0.4% from July to a seasonally adjusted 4.80 million units on a year-over-year basis, according to the National Association of Realtors. This is the slowest pace of sales since June 2020, when activity briefly halted due to the onset of the pandemic.
In addition, this is the slowest pace since November 2015. Sales were 19.9% lower than in August 2021.
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The sales figures show closings, so contracts that were likely signed in June and July, when mortgage rates jumped and then retreated. According to Mortgage News Daily, the average rate on the popular 30-year fixed mortgage started in June at around 5.5% and then climbed to more than 6% by the middle of the month. It then retreated slightly, staying in the 5.7% range for most of July before falling further to the low 5% range at the end of the month.
The 30-year fixed started this year at 3%. It is now close to 6.5%.
Even with interest rates that make housing even less affordable, prices were still higher than a year ago. The median price of an existing home sold in August was $389,500, up 7.7% from a year ago. Home prices have historically fallen from July to August due to seasonality, but this year’s drop was wider than usual, suggesting a significant softening.
From June to August, prices usually fall by about 2%, but this year they fell by about 6%.
“The housing market is showing the immediate impact of changes in monetary policy,” said Lawrence Yoon, chief economist at Realtors, noting that he would revise the annual sales rate further down due to higher mortgage rates. “Some markets may experience price reductions.”
Sales fell in all price categories, but more sharply at the bottom. Sales of homes priced between $250,000 and $500,000 were down 14% year over year, while sales of homes priced between $750,000 and $1 million were down just 3%. Much of this is due to the supply being lowest at the lower end of the market.
Prices are still supported by the lack of supply. At the end of August, 1.28 million homes were listed, which was unchanged from last year. At current sales rates, this equates to 3.2 months of inventory.
“In July, we saw the first signs that a renewed housing market may be weighing on homeowners’ willingness to sell, and that volatility continued in August, when new home sales fell 13%,” said Danielle Hale, chief economist at Realtor.com.
Homebuilders are retreating in the face of falling demand, but there was a small bump in single-family housing starts in August, according to the US Census. This may have been due to a brief drop in mortgage rates, which led to more interest from buyers. But building permits, an indicator of future construction, fell as mortgage rates were expected to rise again.