Home prices hit record as sales dip in August

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(The Center Square) – Sales of existing homes fell in August as high prices limited sales despite relaxing mortgage rates.

Existing-home sales declined 0.2% in August from July, according to the National Association of Realtors. That's a seasonally adjusted annual rate of 4 million and a 1.8% increase in sales year-over-year.

"Home sales have been sluggish over the past few years due to elevated mortgage rates and limited inventory," NAR Chief Economist Lawrence Yun said. "However, mortgage rates are declining and more inventory is coming to the market, which should boost sales in the coming months."

Earlier this month, the Federal Reserve announced a quarter-percentage-point rate cut. The rate cut was the Fed's first since late 2024. The move lowers the benchmark interest rate to a range between 4% and 4.25%, the lowest level in nearly three years. That's down from a target of between 4.25% and 4.5%, where the Fed held it for most of Trump's second term. The central bank signaled the possibility of two more rate cuts this year.

"Given the direction of economic data, the base case seems to be that the jobs data will continue to weaken and inflation will remain milder than feared, paving the way for cuts at the October and December meetings," wrote Chen Zhao, the head of economics research at Redfin. "These cuts are almost entirely priced in already, limiting how much room there is for rates to fall if they come to fruition. Conversely, if the economic data make it impossible to execute these cuts, rates will rise significantly."

The median existing home price for all for housing types hit $422,600 in August, up 2.0% from a year ago ($414,200) and the 26th consecutive month of year-over-year price increases, according to the National Association of Realtors.

"Record-high housing wealth and a record-high stock market will help current homeowners trade up and benefit the upper end of the market. However, sales of affordable homes are constrained by the lack of inventory,” Yun added. “The Midwest was the best-performing region last month, primarily due to relatively affordable market conditions. The median home price in the Midwest is 22 percent below the national median price.”

Inventory remains limited. Total housing inventory was 1.53 million units, down 1.3% from July. However, that's up 11.7% from August 2024 when it was 1.37 million. That's about a 4.6-month supply of unsold inventory, flat from July and up from 4.2 months of supply in August 2024. A six-month supply is generally considered a balanced market.

The median time on market was 31 days in August, up from 28 days last month and 26 days in August 2024.

First-time homebuyers accounted for 28% of sales, that's unchanged from July and up from 26% in August 2024.

More than a quarter of all sales were cash deals. About 28% of transactions were cash sales for August. That's down from 31% a month ago and up from 26% in August 2024.

Individual investors or second-home buyers accounted for 21% of August transactions, up from 20% last month and 19% in August 2024.

The average 30-year fixed-rate mortgage was 6.59% in August, according to Freddie Mac. That's down from 6.72% in July and 6.50% a year ago.