Home sales fall to lowest level since October 2023

By Aarthi Swaminathan

'Home sales were disappointing' but lower mortgage rates could spur activity, industry group says

The numbers: American home sales fell to the lowest level since October 2023, as home buyers held back in the face of high mortgage rates and record-high home prices.

Sales of previously-owned homes fell 2.5% to an annual rate of 3.86 million in August, the National Association of Realtors said Thursday.

That's the number of homes that would be sold over an entire year if sales took place at the same rate in every month as it did in August. The numbers are seasonally adjusted.

The August sales number refers to deals closed prior to mortgage rates plunging that month, since the data is reported with a lag. Existing-home sales data is reported 30 to 60 days after a contract is signed. The figure also doesn't yet account for key changes regarding real-estate commissions that went into effect on August 17.

The pace of sales fell short of expectations of economists surveyed by Dow Jones Newswires and The Wall Street Journal.

Compared to August 2023, home sales are down 4.2%.

Key details: The median price for an existing home in August rose 3.1% to $416,700, as compared with the year before. That's the highest price on record for the month of August.

About 1 in 5 homes were sold above list price, the NAR said, which was down from 24% a month ago. Homes received an average of 2.4 offers.

The total number of homes listed on the market in August rose 22.7% from last year, to 1.35 million units. There is a 4.2-month supply of unsold inventory, which is considered a balanced market.

Listed homes remained on the market for 26 days on average, up from 24 days in the previous month.

Sales of existing homes fell across most of the country, with the South seeing the biggest drop of 3.9% in August.

All-cash buyers made up 26% of sales. The share of individual investors or second-home buyers was 19%.

Twenty-six percent of homes were sold to first-time home buyers, which matches an all-time low last seen in November 2021.

Big picture: The typical home buyer today was facing a tough real-estate market back in July, when they were house hunting. Home prices continued to increase and set new records, while mortgage rates were still elevated at that point.

With rates falling in August, the NAR said it believes sales will perform better in future months.

Yet buyers are still contending with an expensive real-estate market, even if rates are down significantly. The election coming up in November is also giving some buyers jitters.

Furthermore, buyers and sellers are also facing changes in how real-estate agents are compensated that went into effect in the middle of August, which could also have an impact on home sales.

What the Realtors said: "Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months," Lawrence Yun, chief economist at the NAR, said in a statement.

On a call with reporters, Yun said that the Federal Reserve's interest rate cut on Wednesday wouldn't have a meaningful impact on mortgage rates, as the markets have mostly anticipated the 50-basis-point rate cut ahead of the central bank's announcement.

Yun also said he expects lower rates and the commission changes to be reflected in the home-sales data in 3 to 4 months.

-Aarthi Swaminathan

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09-19-24 1000ET

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