- Home sales in the US fell during the month of August.
- House prices, which have skyrocketed, have also fallen.
- The market cools down as many buyers run out of options.
Sales of previously occupied US homes fell in August and skyrocketing prices fell as well, the latest sign that the housing market is cooling down as intense competition leaves many potential buyers on the sidelines.
The home sales of existing properties fell 2% last month from July to a seasonally adjusted annual rate of 5.88 million units, the National Association of Realtors said. That’s slightly more than the 5.87 million economists expected, according to FactSet.
Less home sales
Sales fell 1.5% compared to August last year. Until last month, sales were up 16% this year than in the same stretch in 2020, before a surge in sales as the market rebounded from a slowdown in the early months of the pandemic.
Sales were also up about 12% from where they were in the first eight months of 2019. “So it is clear that home sales are stabilizing, but above pre-pandemic conditions,” said Lawrence Yun. , chief economist of the NAR.
More modest earnings
House prices continued to rise last month, albeit at a less torrid pace. Median home prices rose to $ 356,700, a 14.9% increase from August 2020. That annual gain was more modest than the 20% to 25% year-on-year increases seen earlier this year.
“The huge price gains that we have been seeing in the first half of the year are over and the price trends are clearly moderating,” Yun said, adding that he expects the typical home bought last month to only appreciate around the 5% per year. from now on.
High but stable prices
Still, rising home prices remain a major hurdle for many aspiring homeowners. Last month, first-time buyers accounted for just 29% of home sales, the lowest share since January 2019.
“High home prices are squeezing first-time buyers,” Yun said.
A competitive market
The housing market has become fiercely competitive over the past year, with sellers often receiving multiple offers that exceeded the asking price, as prospective homeowners scrambled to get a home when inventory of properties for sale hit record lows. .
But now there are some signs that the competitive fervor is waning, if only because skyrocketing prices have put off many potential buyers.
Housing shortage continues
Sellers putting homes on the market fail to see the multiple offers that have become common, and buyers increasingly refuse to give up their right to a home inspection. Last month, 23% of buyers chose to forego the home inspection, up from 27% in July, Yun said.
However, the shortage of homes for sale continues to support prices. At the end of August, the inventory of unsold homes stood at 1.29 million homes for sale, 1.5% less than in July and 32% less than a year ago. At current sales rates, that equates to a 2.6-month supply, the NAR said.
Cash sales fall
And houses continue to sell within days of going on the market. Homes typically stayed on the market 17 days before being bought last month. That hasn’t changed since July and is down since August 22, 2020. About 87% of homes sold last month were on the market for less than a month, the NAR said.
Individual investors, representing a lot of cash sales, bought 15% of homes in August, including July, but compared to 14% in August 2020. Cash sales accounted for 22% of transactions, for below 23% in July and above 18% in August of last year.
Low interest on the purchase
Buyers still benefit from ultra-low mortgage rates, which help make financing more affordable. The median interest rate on a 30-year mortgage fell to 2.86% last week, according to mortgage buyer Freddie Mac. That’s very close to where the benchmark rate was at this time last year, 2.87%. . This year it peaked at 3.18% in April.
But Yun pointed out that mortgage rates are likely to only increase from here by the end of the year or in 2022, citing expectations that the Federal Reserve is closing in to start cutting monthly bond purchases by $ 120 billion, that are being done to help lower long-term interest rates.