According to the National Association of Realtors, sales of previously owned homes declined 0.4% in August from July to an annualized seasonally adjusted rate of 4.80 million units. That is the lowest sales rate since May 2020, when activity came to a very brief halt due to the onset of the pandemic.
Other than that, it’s the slowest pace since November 2015. Sales were 19.9% lower than in August 2021.
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The sales figures represent closings, so contracts likely signed in June and July, when mortgage rates rose higher and then declined. The average interest rate on the popular 30-year fixed mortgage started in June at about 5.5% and then shot up more than 6% by mid-month, according to Mortgage News Daily. It then retreated a bit and stayed 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 commitment started at 3% this year. It is now almost 6.5%.
Even with interest rates making homes even less affordable, prices were still higher than they were a year ago. The median price of an existing home sold in August was $389,500, up 7.7% from a year ago. Historically, house prices fell seasonally from July to August, but the decline was larger than usual this year, indicating a significant slowdown.
From June to August, prices usually fall by about 2%, but this year they have fallen by about 6%.
“The housing market is having an immediate impact from the changes in monetary policy,” said Lawrence Yun, chief economist for the Realtors, noting that he will further adjust his annual sales forecast due to higher mortgage rates. “Some markets may see price drops.”
Sales fell in all price categories, but more strongly at the bottom. Sales of homes priced between $250,000 and $500,000 fell 14% year over year, while sales of homes priced between $750,000 and $1 million fell just 3%. Much of that has to do with supply, which is lowest at the lower end of the market.
Prices are still being pushed up by the tight supply. At the end of August there were 1.28 million homes for sale, unchanged from a year. At the current rate of sales, that equates to a stock of 3.2 months.
“July saw the first sign that the housing market renewal could affect homeowners’ desire to sell, and that hesitation continued into August, when the number of newly listed homes fell by 13%,” said Danielle Hale, chief economist. for broker.com.
Homebuilders withdrew due to falling demand, but there was a small increase in single-family home take-offs in August, according to the US Census. This may have been due to a brief decline in mortgage rates, which sparked increased buyer interest. But building permits, which are an indicator of future construction, fell as mortgage rates were expected to rise again.