Sales of previously owned homes experienced a 2.5% decline in August compared to July, reaching a seasonally adjusted annualized rate of 3.86 million units, according to the National Association of Realtors. While this figure is slightly lower than analysts’ expectations, it is important to note that sales have been consistently below the 4 million mark for the past three months.
This decrease in sales can be attributed to the timing of closings, as contracts were likely signed in late June and July when mortgage rates were starting to decline but were not as low as they are today. In mid-June, the average rate for a 30-year fixed loan was slightly above 7%, which then steadily fell to 6.7% by the end of July, according to Mortgage News Daily.
Lawrence Yun, the chief economist at NAR, expressed disappointment in the August sales figures but remains optimistic about the future. He believes that the combination of lower mortgage rates and increasing inventory will create a favorable environment for sales to rise in the coming months. However, Yun also noted that the home-buying process typically takes several months, from the initial search to obtaining the house keys.
While there has been a slight improvement in the inventory of homes for sale, with a 0.7% increase from July and a 22.7% increase year over year, it is still considered a seller’s market. At the end of August, there were 1.35 million units available for sale, resulting in just a 4.2-month supply. A balanced market is typically characterized by a 6-month supply.
Yun explained that the rise in inventory and the accompanying months’ supply indicate that home buyers now have a better chance of finding the right home at more favorable prices. However, in areas where supply remains limited, such as many markets in the Northeast, sellers still hold the upper hand.
The tight supply of homes continues to put pressure on prices. In August, the median price of an existing home sold reached a record high of $416,700, reflecting a 3.1% increase compared to the same month in 2023. It is important to consider that this median price may be influenced by the types of homes that were selling in August. Sales were particularly strong for homes priced above $750,000, while they declined for properties priced below $500,000.
First-time buyers accounted for just 26% of August sales, matching the all-time low recorded in November 2021. Additionally, all-cash sales represented 26% of the market, which, while slightly lower than the previous year, remains historically high.
In recent months, mortgage rates have continued to decline, reaching a low of 6.15% for the 30-year fixed loan in August and September. This is the lowest rate in approximately two years, and it further contributes to the favorable conditions for potential homebuyers.
Overall, while August saw a decline in home sales, the combination of lower mortgage rates and increasing inventory provides hope for a rebound in the coming months. However, the tight supply of homes and rising prices continue to pose challenges for buyers, particularly in areas with limited supply. It is essential for buyers to carefully consider their options and work with experienced real estate professionals to navigate the current market conditions successfully.
