US home sales fell 0.2% in August, marking the slowest pace since June, despite a drop in mortgage rates. This trend highlights the ongoing affordability crisis in the housing market.
Sales rose 1.8% compared to August of last year. The latest sales figure surpassed the 3.96 million that economists had expected, according to FactSet.
The national median sale price increased 2% in August from a year earlier, reaching $422,600. This marks the twenty-sixth consecutive month of annual price increases and the highest median sale price for any August since record-keeping began in 1999.
Obtaining a Mortgage Remains Challenging
The US housing market has been in a sales slump since 2022, when mortgage rates began rising from historic lows in the post-pandemic era. Sales of existing homes in the US fell last year to their lowest level in nearly 30 years. In the first eight months of this year, home sales have dropped 1.2% compared to the same period last year.
However, mortgage rates have mostly been declining since late July, ahead of the Federal Reserve’s first rate cut of the year, amid growing concerns about the US labor market.
While lower rates give homebuyers more purchasing power, borrowing costs remain too high for many Americans to afford a home after years of soaring prices. The median US home sale price is now 52% higher than in August 2019, before the housing market surged during the early years of the pandemic.
“However, mortgage rates are falling and more inventory is hitting the market, which should boost sales in the coming months,” said Lawrence Yun, chief economist at NAR.
Homes purchased last month were likely locked in during June and July, when the average 30-year mortgage rate hovered between 6.85% and 6.72%, according to Freddie Mac. The decline in mortgage rates accelerated in August and this month, with the average rate hitting a low of 6.26% last week.
Housing Market Recovery Begins
Homebuilders have successfully boosted sales by lowering prices and offering incentives, including lower mortgage rates for buyers who may not afford current rates.
Sales of new single-family homes in the US surged 20.5% in August from the previous month, reaching a seasonally adjusted annual rate of 800,000 units, according to the US Census Bureau. Sales rose 15.4% from a year earlier, the fastest pace so far this year, though they remain 1.4% below last year’s levels.
However, new home sales make up a small fraction of the overall housing market, which remains constrained by affordability issues and a chronic shortage of homes for sale, particularly at the more affordable end of the market.
This trend has particularly affected first-time homebuyers, who lack equity to invest in a new home. They accounted for 28% of home sales last month. Historically, they represented 40% of home sales.
Still, the inventory of homes for sale across the US has gradually increased as the market has slowed, now reaching a level where supply and demand are more balanced.
Image: DiarioNY
