U.S. Home Sales Slipped in August Despite Falling Mortgage Rates
Home prices remain high and many buyers are sticking to the sidelines
U.S. home sales fell in August as the recent decline in mortgage rates failed to offset home prices that remain near record highs.
Sales of previously owned homes in August fell 2.5% from the prior month to a seasonally adjusted annual rate of 3.86 million, the National Association of Realtors said Thursday, the fifth time sales have declined over the past six months.
The average rate for a 30-year fixed mortgage has slid steadily from the spring to 6.09% this week, the lowest level in more than a year, according to Freddie Mac. But with high housing prices and the inventory of homes for sale still lower than normal, many buyers are waiting for rates to fall further.
Those buyers may not get much more relief soon, said Lawrence Yun, NAR’s chief economist. The Federal Reserve cut short-term interest rates by half a percentage point Wednesday. But the mortgage market has already priced in expectations for additional Fed rate cuts, which means mortgage rates might not fall further in the coming months, he said.
“Any further decline in mortgage rates will be minimal,” Yun said.
On an annual basis, existing-home sales, which make up most of the housing market, fell 4.2%.
The national median existing-home price in August was $416,700, a 3.1% increase from a year earlier, NAR said. While that is down from the recent high, it is the highest median home price for any August, Yun said. Prices aren’t adjusted for inflation.
“August home sales are a disappointment,” Yun said. “The positive influencing factor of mortgage rates and [rising] inventory has yet to impact the market.”
The housing market remains out of reach for millions of would-be buyers. The high cost of housing has become a hot topic on the campaign trail, with both parties promising to help increase the supply of homes.
Despite the slow end to the summer, some real-estate agents and loan officers expect a pickup in activity this fall if rates decline further.
“We could have another busy end of the year depending on where rates go,” said Lauryn Dempsey, a real-estate agent in the Denver area. “There’s obviously lots of talk about the Federal Reserve dropping interest rates, and that always catches clients’ eyes.”
Nationally, there were 1.35 million homes for sale or under contract at the end of August, up 0.7% from July and up 22.7% from August 2023, NAR said.
At the current sales pace, there was a 4.2-month supply of homes on the market at the end of August. That is at the low end of what is considered a balanced market between buyers and sellers.
The inventory of homes for sale is rising because some sellers who have been waiting for interest rates to fall are deciding they can’t wait any longer, said real-estate agents.
Douglas MacLachlan and Michelle Evans had a 2.5% mortgage rate on the Chicago condo they bought in 2021, but they wanted to move out of the city after having a child in 2022. The couple bought a four-bedroom house in Arlington Heights, Ill., in July and sold their condo in August. Their current mortgage rate is 6.99%, but they hope to refinance in the future if rates decline, MacLachlan said.
“If we didn’t have our daughter and we didn’t have a reason to move, we would not have left our condo,” MacLachlan said. “But life happens.”