Sales of existing homes fell in August, with inventory and prices remaining a major concern for potential buyers.
Existing home sales fell 2% to a seasonally adjusted annual rate of 5.88 million in August, the National Association of Realtors said on Wednesday. Compared with August 2020, home sales fell 1.5%.
“Although there has been a decline in home purchases, potential buyers are looking but much more measured about their financial limits and just expecting more inventory,” said Lawrence Yun, chief economist of the National Association of Realtors, in the report.
Economists polled by MarketWatch had forecast sales of existing homes to rise to 5.87 million. The median selling price of an existing home increased nearly 15% year-over-year to $ 356,700.
What Happened: Inventory Was Down
The total housing stock at the end of August was 1.29 million units, down 1.5% from July and 13.4% from a year ago.
Expressed in terms of monthly supply, there was a 2.6 month supply of homes based on the current pace of sales, unchanged from July. A housing supply over six months is indicative of a balanced market in general.
All regions experienced a monthly drop in home sales, driven by a 3% drop in the South.
Overview: inventory is improving overall
The good news for potential buyers is that the inventory of homes for sale is improving. Since the winter low, stocks have risen about 16%, according to an analysis by Ian Shepherdson, chief economist at Pantheon Macroeconomics. At the same time, price appreciation has slowed, with house prices now increasing by less than 1%, according to Shepherdson’s calculations, rather than more than 2% per month at the peak of the market.
“These trends are expected to continue as sellers realize that the best-price cash-out window appears to be closing,” Shepherdson wrote.
This is to the advantage of home buyers who are struggling with skyrocketing house prices and stiff competition for the few homes on the market. These conditions have likely caused some buyers to put off their search for a home, and these people may resume their searches in the months to come.
What they say: a ‘Delta dip’?
“The relationship of the housing market to this pandemic economy is complicated. While heightened economic uncertainty undermines consumer confidence and can lead to a credit crunch, it also puts downward pressure on mortgage rates, ”wrote Mark Fleming, Chief Economist at First American Financial, in a news story. to analyse. “The labor shortage relative to the growing demand for labor has fueled the growth in household income. As the economy may be plunging into a “delta,” the unexpected explosion in increased housing purchasing power has boosted the potential of the housing market. “
“Pending home sales have wilted over the past two months, suggesting that activity has been somewhat constrained by soaring house prices and supply constraints. Overall, though the real estate market has cooled since the start of the year, we expect it to remain strong amid rising employment and low interest rates, ”wrote Priscilla Thiagamoorthy, economist at BMO Markets capital, in a study.
“Those who continue their home research in the colder months to come will likely be pleasantly surprised. Not only do we expect to see the usual seasonal respite from the competitive spring and summer home buying season – making early fall the best time to buy a home – the sellers return. in the housing market driven by improving economy and decreasing health risks could accentuate this trend, ”said Danielle Hale, chief economist at Realtor.com.
Market reaction: Dow and S&P 500 on the rise
The Dow Jones Industrial Average and the S&P 500 were both higher on Wednesday morning ahead of an announcement from the Federal Reserve, which could deal with central bank asset purchases.