August Housing Market Slips as Sales Drop, But Lower Mortgage Rates Offer Hope

August brought a bit of a stumble to the housing market, with sales of previously owned homes sliding by 2.5% from July. The rate of the pace dropped to an annual rate of 3.86 million units— a bit lower than what was expected.  Compared to last year’s numbers, sales are down by 4.2%, and it’s now in three consecutive months figures are staying below the 4 million mark.

NAR: Existing-Home Sales Decreased to 3.86 million SAAR in August; Median House Prices Increased 3.1% Year-over-Year https://t.co/cS4SfUtYK0

This was the thirty-sixth consecutive month with sales down year-over-year. pic.twitter.com/l8jJNSC77f

— Bill McBride (@calculatedrisk) September 19, 2024

These numbers come from finalized sales, reflecting contracts likely signed earlier, in late June and July… back when mortgage rates were still stubbornly high. In mid-June, the 30-year fixed rate was stuck at just over 7%, slowly working its way down to 6.7% by the end of July, according to the Mortgage News Daily report.

The world of real estate—it’s a waiting game, a balance of timing and perseverance. Lawrence Yun, chief economist at the National Association of Realtors, wasn’t exactly thrilled by the August sales numbers. “Disappointing,” he said… but there’s a silver lining. The drop in mortgage rates, paired with a modest uptick in available homes, could help shift the market in the coming months. After all, buying a home isn’t a one-week process—searching, negotiating, closing—it all takes time. So, the true impact of these lower rates might take a little longer to show up in the sales data.

Existing home sales fell 2.5% in August, coming in weaker than expected. This was the lowest level since October 2023. pic.twitter.com/aHgQwySGK4

— Yahoo Finance (@YahooFinance) September 19, 2024

Inventory is creeping up… but just barely. By the end of August, there were 1.35 million homes on the market, a slight increase of 0.7% from July and a notable 22.7% rise from the previous year. Still, with only a 4.2-month supply, the market remains tight— far below the six-month supply that would indicate more balance between buyers and sellers. In some regions, especially in the Northeast, sellers are still holding most of the cards.

And there is of course the issue of price. The median price of homes sold in August hit $416,700— a new high for the month, and 3.1% more than in August 2023. But median prices can be a little deceiving… A big chunk of those sales came from homes priced over $750,000, while homes below $500,000 could manage fewer buyers in number.

First-time buyers are also feeling the heat, accounting for just 26% of sales in August—a repeat of the all-time low from November 2021. Cash buyers are still very much in the game, making up 26% of sales, a bit lower than last year but still historically high.

Supply is coming back to the housing market, but it didn’t help the August existing home sales result. Sales of existing homes fell by 3.1% (NSA) in August, diverging from the 1.8% rise that is normal at this time of year. $STUDY $MACRO #Economy #Housing pic.twitter.com/XkTPWDrfaH

— Equity Clock (@EquityClock) September 19, 2024

On the bright side of things, there have been found a significant drop in mortgage rates  By the end of September, the 30-year fixed rate landed at 6.15%— the lowest it’s been in nearly two years. It might not be enough to ensure change in the housing landscape, but for buyers on the fence, it could be a boost they need.

Major Points

• Sales of previously owned homes fell 2.5% in August, reaching an annualized rate of 3.86 million units.
• Compared to last year, sales are down 4.2%, marking the third consecutive month of sub-4 million figures.
• Mortgage rates, stuck above 7% in mid-June, fell to 6.7% by late July and continued to drop, offering potential relief for future buyers.
• Inventory saw a slight increase, but at 1.35 million homes, the market remains tight with only a 4.2-month supply.
• The median home price rose to $416,700 in August, driven by high-end sales, while first-time buyers struggled, making up just 26% of the market.

TL Holcomb – Reprinted with permission of Whatfinger News