U.S. existing home sales fell more than expected in August as home prices remained elevated despite a continued improvement in supply.
Home sales fell 2.5% last month to a seasonally adjusted annual rate of 3.86 million units, the National Association of Realtors said Thursday.
Economists polled by Reuters had forecast existing home sales would fall to a rate of 3.90 million units.
Existing home sales, which account for a large portion of U.S. home sales, fell 4.2% year-over-year in August.
The median existing-home price rose 3.1% from a year ago to $416,700, the highest price on record for any August.
House prices rose in all four regions.
The Federal Reserve on Wednesday cut interest rates by 50 basis points, the first reduction in borrowing costs since 2020. The move could cause mortgage rates, which have retreated to 1-1/2-year lows, to fall further.
Lower mortgage rates could encourage more homeowners to put their homes on the market, which could increase supply.
Most homeowners have mortgage rates below 4% and the so-called “rate lock” left the existing housing market without supply.
However, lower financing costs could stimulate demand that exceeds supply, keeping home prices high.
Federal Reserve Chairman Jerome Powell told reporters Wednesday that “the real problem with housing is that we have had and are on track to continue to have an insufficient supply of housing,” adding that “this is not something that the Fed can really fix, but I think as we normalize rates, we will see the housing market normalize.”
Housing inventory rose 0.7% to 1.35 million units last month. Supply increased 22.7% from a year earlier.
“Home sales again disappointed in August, but the recent trend of lower mortgage rates coupled with rising inventory is a powerful combination that will set the stage for sales to pick up in the months ahead,” said Lawrence Yun, NAR’s chief economist.
At August’s sales pace, it would take 4.2 months to exhaust the current inventory of existing homes, down from 3.3 months a year ago. A four- to seven-month supply is considered a healthy balance between supply and demand.
Properties typically stayed on the market for 26 days in August, compared with 20 days last year.
First-time buyers accounted for 26% of sales, matching the record low last seen in November 2021, up from 29% a year ago.
That ratio is still below the 40% that economists and real estate agents say is necessary for a healthy housing market.
Cash sales accounted for 26% of transactions, down from 27% a year ago.
Distressed sales, including foreclosures, accounted for just 1% of transactions, unchanged from last year.
