August marked the seventh consecutive monthly decline in U.S. existing home sales, according to the latest data from the National Association of Realtors (NAR).
Sales fell to a seasonally adjusted annual rate of 4.8 million, down 0.4% from July and down 19.9% from August 2021. The overall pace is the weakest seen by the market since May 2020. In something of a silver lining, however, sales beat the estimated rate of 4.69 million predicted by a Bloomberg poll of economists.
Single-family sales fell monthly by 0.9% while sales of condominiums and co-ops grew by 4%. Interest rate volatility — mostly of the upward variety — has slowed the residential real estate market to a relative crawl compared to the pandemic-era housing boom of 2020 and 2021.
“The housing sector is the most sensitive to and experiences the most immediate impacts from the Federal Reserve’s interest rate policy changes,” said Lawrence Yun, NAR’s chief economist. “The softness in home sales reflects this year’s escalating mortgage rates.”
Rates rose above 6% last week for the first time since 2008, according to Freddie Mac. Meanwhile, with rates moving upward fast, some borrowers have found themselves able to qualify for a mortgage one week only to lose their eligibility a few days later. Wells Fargo economists Charlie Dougherty and Patrick Barley speculated that, with rates retreating slightly in late July and early August, the better-than-expected sales pace was likely fueled by buyers looking to lock in slightly lower mortgage rates before they rose further.
Homeowners, meanwhile, are still doing fine as distressed property sales are “near nonexistent” and home values are still higher than last year, according to Yun. But Dougherty and Barley noted that sellers — the majority of whom hold home loans with rates below 5% — aren’t keen on trading their current mortgages for new ones in the high interest rate environment. That’s more bad news for buyers, since it’s likely to keep inventory low and somewhat offset the downward pressure on home prices exerted by weakened demand.
Total housing inventory at the end of August was 1,280,000 units, down 1.5% from July and flat compared to the same month last year. There’s currently a 3.2-month supply of unsold inventory at the current sales pace, unchanged from July and up from 2.6 months in August 2021.
The median existing home price in August was $389,500, up 7.7% year over year. Prices for existing homes have now grown annually for 126 straight months, a record streak.