Existing home sales in the US came in slightly better than expected for August, while months’ supply was unchanged, data out Wednesday showed.
Sales of previously owned homes fell 0.4% last month, the NAR said. The 4.8 million annual rate was the slowest since the pandemic plunge, although the more moderate monthly decline could suggest the market stabilized amid what proved to be a fleeting drop in mortgage rates.
Prior to August’s minuscule drop, existing home sales notched six consecutive sizable monthly declines (figure above).
On a YoY basis, sales were almost 20% lower, underscoring the extent to which affordability concerns continue to weigh on activity.
“The housing sector is the most sensitive to and experiences the most immediate impacts from the Fed’s interest rate policy changes,” NAR Chief Economist Lawrence Yun said Wednesday, blaming “softness” in home sales on “escalating mortgage rates,” which rose above 6% last week (figure below).
Nevertheless, Yun described homeowners as “doing well.” Distressed property sales are “near nonexistent,” he remarked, while noting that home prices are “still higher than a year ago.”
That latter assessment, while encouraging, makes for a stark juxtaposition with the sort of color that typically accompanied housing market data earlier this year, when prices were still rising at an inexorable annual pace. Although prices rose in all regions last month, the 12-month rate was “just” 7.7%. To be sure, that’s a healthy rate of price appreciation, but it pales in comparison to the sort of eye-popping gains seen across national price indexes when the boom peaked amid the onset of the most aggressive Fed tightening campaign in a generation.
The median existing home price was $389,500 last month. Although August marked the 126th straight YoY increase, it also counted as the second consecutive MoM decrease. Yun cited “the usual seasonal trend,” but prices are now almost 6% off record highs hit in June. Properties stayed on the market longer last month, but more than three quarters still sold in less than 30 days.
One dynamic worth watching going forward is homeowner “lock-ins.” With mortgage rates double what they were last year, Americans are unlikely to sell their current home unless they intend to rent or buy a new one in cash. That may mean that inventories remain artificially suppressed, which in turn lends support to what might otherwise be rapidly falling prices.
Yun alluded to that dynamic on Wednesday. “Inventory will remain tight in the coming months and even for the next couple of years,” he said. “Some homeowners are unwilling to trade up or trade down after locking in historically-low mortgage rates in recent years, increasing the need for more new-home construction to boost supply.”