The numbers: U.S. existing-home sales fell 0.4% to a seasonally adjusted annual rate of 4.8 million in August, the National Association of Realtors said Wednesday.
This is the seventh straight monthly decline.
Economists polled by the Wall Street Journal were expecting a steeper decline in existing-home sales to 4.68 million.
This is the lowest level of existing home sales since May 2020, during the pandemic downturn.
Excluding the recession, the level of sales activity was lowest since November 2015.
Compared with August 2021, home sales were down 19.9%.
Key details: Existing-home prices moderated. The median price for an existing home fell to $389,500, down from a peak of $413,800 reached in June.
Home prices are still up 7.7% from August 2021, but that’s the smallest increase since June 2020.
The number of homes on the market fell 1.5% to 1.28 million units in August.
Expressed in terms of the months-supply metric, there was a 3.2-month supply of homes for sale in August, up from 2.6 months in August. Before the pandemic, a four or five-month supply was more the norm.
Homes remained on the market for 16 days on average, up from 14 days in July. Pre-pandemic, the average time for homes to remain on the market was a month.
Sales of existing-homes were mixed across the country.
Sales of existing-home increased in the Northeast and the West, but sales fell surprisingly in the Midwest. Sales in the south were unchanged.
All-cash transactions made up 24% of all transactions. About 29% of homes were sold to first-time home buyers, unchanged from the previous month and year.
Big picture: Existing-home sales are down 11% year-to-date.
Rates have flown past 6%, and are expected to rise further as the Federal Reserve embarks on its aggressive quest to quell inflation.
“The housing market is showing an immediate impact from the changes of monetary policy,” Lawrence Yun, chief economist at the National Association of Realtors said.
Builders are upping incentives to entice apprehensive buyers, worried about a looming recession.
To be clear, homes are still expensive. And borrowing costs are elevated, with the average contract rate for a 30-year fixed-rate mortgage at 6.25%, according to the Mortgage Bankers Association.
What the realtors said: Those who locked in rates last year are sitting pretty right now, Yun added.
“Homeowners are loving their low interest rates… they do not want to give up that 3% mortgage rate” and move, he said.
So the “lock-in effect is impacting inventory,” Yun added.
People need to extend their budget by 30% to afford a similarly-priced home, solely due to rates rising.
What are economists saying? “The latest rise in mortgage rates – up nearly 30 basis points since the end of August – has taken a further toll on homebuying affordability that will weigh on home sales in the months ahead. Our forecast calls for sales to average 4.6mn in the fourth quarter, but the risk is probably tilted to the downside. Home price growth is likely to continue to decelerate, but the limited supply of homes for sale will likely prevent too steep a decline,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.