Sales of previously owned homes remained essentially flat in August, totaling 4 million units on a seasonally adjusted, annualized basis, as reported by the National Association of Realtors (NAR). This figure reflects a slight 0.2% drop from July but shows a promising increase of 1.8% compared to August of the previous year. The Midwest region emerged as the strongest market, while the Northeast experienced the weakest performance.
The reported sales figures are based on closings from June and July, a period when mortgage rates were approximately 50 basis points higher than current levels. Notably, mortgage rates began to decline significantly at the start of September, which means these recent changes are not reflected in the current sales data.
Upper-end homes are performing notably better than their lower-end counterparts. Specifically, sales of homes priced above $1 million increased by 8% year over year, making them the top performers in the market. In contrast, sales of homes priced below $100,000 saw a more than 10% decline compared to last year. This disparity indicates that while the luxury market is thriving, affordable housing remains a challenge.
According to Lawrence Yun, the chief economist for NAR, the lack of inventory is a significant constraint on the sale of affordable homes. Despite record-high housing wealth and a booming stock market, which could allow current homeowners to trade up, the limited supply of affordable options is hindering market growth in this segment.
The Midwest was highlighted as the best-performing region in August, benefiting from affordable market conditions. The report indicated that median home prices in the Midwest were 22% below the national median price, making it an attractive option for homebuyers.
Supply dynamics in the housing market are undergoing notable changes. After a significant increase earlier this year, there was a 1.3% decline in housing supply from July, marking the first monthly drop since the beginning of the year. However, supply remains up 11.7% year over year. This decrease in supply is attributed to sellers responding to weaker prices and higher mortgage rates by either withdrawing from the market or delaying their decision to list their homes.
As of August, there was a 4.6-month supply of homes for sale, which is considered a lean market. This tightening of supply is helping to keep home prices in a positive trajectory. The median price of an existing home sold in August reached $422,600, representing a 2% increase from the previous year and marking the 26th consecutive month of annual price gains.
Homes are staying on the market longer, with an average duration of 31 days in August, up from 26 days the previous year. Additionally, the share of first-time homebuyers has dropped to a historically low 28%, while all-cash buyers continue to dominate, accounting for 28% of total sales, an increase from 26% last year. This trend indicates a shift in buyer demographics and financing options in the current housing market.
