Sales of US homes crept down further in August, industry data showed Thursday, as supply remained limited while mortgage rates stayed high.
Sales of existing homes have cooled in the world’s top economy as interest rates surged, lifting costs for new buyers and making it less attractive for home owners to reenter the market after having locked in lower rates previously.
Existing home sales hit an annual rate of 4.04 million last month, seasonally adjusted, slipping 0.7 percent from July according to the National Association of Realtors (NAR).
The figure was lower than analysts expected and 15.3 percent below the same period a year ago.
“Sales are struggling, homebuyers are struggling,” said NAR chief economist Lawrence Yun.
He added in a statement that mortgage rate changes will have a big impact over the short-term.
NAR data also showed that home prices continued climbing despite slower sales. The sales rate still hovers at the lowest levels since January.
“Supply needs to essentially double to moderate home price gains,” Yun said.
The median price for an existing US home in August rose to $407,100, 3.9 percent above the same month last year and the fourth highest on record according to Yun.
Meanwhile, total housing inventory retreated from July’s levels as well.
Sales are down 17 percent in the third quarter so far, weakening from a 6.9 percent drop in the second quarter this year, said economist Rubeela Farooqi of High Frequency Economics.
There is likely to be a “renewed drop in sales” ahead, following the latest decline in mortgage applications, economists Ian Shepherdson and Kieran Clancy of Pantheon Macroeconomics said in a note.
The economists added that they “see no definitive bottom yet in mortgage applications.”
The popular 30-year fixed-rate mortgage averaged around 7.2 percent as of September 14, according to home loan finance company Freddie Mac.
A year ago, the level was six percent — substantially higher than the 2.9 percent figure in mid-September 2021.
Yun said it is “possible that mortgage rates may go up to eight percent in the short run” before retreating next spring. If this happens, home sales could continue to slump.
“A real recovery cannot begin until mortgage rates fall substantially,” said the Pantheon report.
