Previously owned home sales fell 0.4% in August from July to a seasonally adjusted annual rate of 4.80 million units, according to the National Association of Realtors. This is the slowest pace of sales since May 2020, when activity was halted very briefly due to the onset of the Covid pandemic.
Other than that, it’s the slowest pace since November 2015. Sales are 19.9% lower than in August 2021.
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The sales numbers represent closings, so contracts are likely to be signed in June and July, when mortgage rates rose and then fell. The average 30-year fixed rate mortgage started in June at around 5.5% and then rose more than 6% by the middle of the month, according to daily mortgage news. Then it pulled back a bit, hanging in the 5.7% range for most of July before dropping further to the low 5% range at the end of the month.
The 30-year fixed term started this year at 3%. It is now approaching 6.5%.
Even with interest rates making housing less expensive, prices were still higher than they were a year ago. The median price for an existing home sold in August was $389,500, up 7.7% from a year ago. Home prices have historically fallen from July to August, due to seasonality, but the decline this year has been wider than usual, indicating a significant downturn.
From June to August, prices usually fall by about 2%, but this year they have fallen by about 6%.
“The housing market is showing an immediate impact from changes in monetary policy,” said Lawrence Yun, chief economist at real estate brokers, noting that it will adjust its annual sales forecast further downward due to higher mortgage rates. “Some markets may see a drop in prices.”
Sales fell in all price categories, but more sharply at the lower end. Sales of homes between $250,000 and $500,000 are down 14% year over year, while sales of homes between $750,000 and $1 million are down just 3 percent. A lot of that has to do with supply, which is the lowest in the lower end of the market.
Prices are still supported by the lack of supply. There were 1.28 million homes for sale at the end of August, unchanged from last year. At the current sales pace, this represents a supply of 3.2 months.
said Danielle Hill, chief economist at Realtor.com.
Homebuilders are holding back in the face of lower demand, but there was a small bump in starting single-family homes in August, according to the US Census. Perhaps it was due to the slight drop in mortgage rates during that time, which sparked more interest from buyers. But building permits, an indicator of future construction, fell as mortgage rates were expected to rise again.
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