The U.S. housing market showed further signs of cooling in August, with sales of previously owned homes sliding to their weakest annualized pace in more than a year as prospective purchasers awaited more favorable financing conditions.
Data released Thursday by the National Association of Realtors showed that existing home sales dropped by 2% on a seasonally adjusted annualized basis, landing at 3.98 million units during the month. This marks one of only two instances since autumn 2024 where the monthly annualized sales figure dipped below the 4 million threshold, underscoring the sector's growing need for renewed momentum.
While the pace of home price appreciation has moderated from the double-digit annual gains witnessed during the pandemic era, affordability constraints persist as a formidable hurdle for buyers confronting today's market landscape.
The median price for an existing home climbed 1.6% year-over-year to $429,100, maintaining a continuous annual uptrend that has stretched back to mid-2023. Concurrently, mortgage rates hovering at their most elevated levels in over a year have further suppressed relocation activity, particularly among homeowners who secured financing at rates less than half of current levels during the refinancing boom several years ago.
According to a recent housing market report from Apollo Global Management, fewer than one-quarter of outstanding mortgages nationwide carry an interest rate exceeding 6%.
NAR Chief Economist Lawrence Yun commented in a statement, observing the inverse relationship between borrowing costs and sales activity, saying it comes as no surprise that higher mortgage rates have produced a modest pullback in transactions. However, during a call with reporters, Yun emphasized that buyer demand has not collapsed in response to rising rates, citing resilient employment conditions and wage expansion as supporting factors. He also noted that mortgage rates could soon approach the 7% mark.
On a more positive note, inventory levels are expanding. The NAR report revealed that the supply of homes on the market climbed to its highest point since November 2019, with 1.62 million units available in August—an increase of 5.9% compared to the same period last year. At the prevailing sales velocity, this housing stock translates to a 4.9-month supply, marking the highest reading in over a decade.
The association's housing affordability index, which gauges whether a typical household earns sufficient income to qualify for a mortgage on a median-priced home, also showed improvement. The measure rose 3.5% from a year earlier, although it continues to sit at historically depressed levels.