The housing market continues to cool amid high mortgage rates, affordability challenges and still-low inventory.
In August, existing-home sales fell 0.7% from July to a seasonally adjusted annual rate of 4.04 million, according to a new report from the National Association of Realtors (NAR). Existing-home sales were down 15.3% compared to a year ago.
Despite a sharp drop in home sales compared to August 2022, the median existing-home sales price rose 3.9% to $407,100 over the same time period, according to NAR. This marks the third consecutive month the median sales price surpassed $400,000, NAR found. All four U.S. regions posted price increases.
However, month-over-month, the median home price nationally was flat in August, Bright MLS Chief Economist Lisa Sturtevant noted.
“Prices had risen by less than 2% in July after five consecutive year-over-year price declines,” she added. “Fall could bring more declines in home prices as more buyers bow out.”
Housing inventory remains tight heading into fall
Meanwhile, total housing inventory at the end of August was 1.1 million units, down 0.9% from July and 14.1% from the year prior (1.28 million).
“There were 180,000 fewer homes for sale compared to a year earlier,” Holden Lewis, home and mortgage expert at NerdWallet, said.
Regionally, the Midwest registered the most home sales. There, existing-home sales increased by 1% from the previous month to an annual rate of 970,000 in August, down 16.4% from the prior year. The median price in the Midwest was $305,300, up 6.8% from August 2022.
Sales in the Northeast remained unchanged from July but down 22.6% from August 2022. The median price in the Northeast was $465,700, up 5.8% from a year ago. Existing-home sales in the South and in the West faded by 1.1% and 2.6%, respectively, from July.
However, the South posted a lighter decline in sales than it did a year ago due to “greater regional job growth since coming out of the pandemic lockdown,” NAR Chief Economist Lawrence Yun noted.
Elevated mortgage rates add to affordability pain
As of Aug. 17, mortgage rates surpassed 7%, the 30-year, fixed-rate mortgage averaged 7.18% as of Sept. 14, and that’s a situation that economists don’t see changing soon.
“Since the Fed’s September projections keep another rate hike on the table, mortgage rates are not likely to drift lower in the absence of new data warranting a reconsideration of the outlook,” Realtor.com Chief Economist Danielle Hale said.
As a result, affordability headwinds are likely to persist, she added.
In such a context, potential first-time homebuyers may be more tempted to turn toward renting as a more affordable alternative.
Despite the slight uptick in newly listed homes in August, housing inventory remained one of the primary challenges for the market. However, on a yearly basis, home sales declines eased, Hale said.
“The year 2023 is shaping up to be the first year since 2011 when annual existing-home sales will come in below 4.5 million,” Sturtevant said.
