Sales of previously owned homes fell 0.4% in August from July to a seasonally adjusted annualized rate of 4.80 million units, according to the National Association of Realtors. That is the slowest sales pace since May 2020, when activity stalled very briefly due to the start of the Covid pandemic.
Outside of that, it is the slowest pace since November 2015. Sales were 19.9% lower than in August 2021.
The sales figures represent closings, so contracts that were likely signed in June and July, when mortgage rates spiked higher and then pulled back. The average rate on the popular 30-year fixed mortgage began June at around 5.5% and then shot up over 6% by the middle of the month, according to Mortgage News Daily. It then pulled back a bit, hanging in the 5.7% range for most of July before dropping further to the low 5% range at the end of the month.
The 30-year fixed started this year at 3%. It is now close to 6.5%.
Even with interest rates making housing less affordable, prices were still higher than a year ago. The median price of an existing home sold in August was $389,500, up 7.7% from a year ago. Home prices historically decline from July to August, due to seasonality, but the drop this year was wider than usual, suggesting a significant softening.
From June through August, prices usually decline about 2%, but this year they have fallen about 6%.
“The housing market is showing an immediate impact from the changes in monetary policy,” said Lawrence Yun, chief economist for the Realtors, noting that he will revise his annual sales forecast down further due to higher mortgage rates. “Some markets may be seeing price declines.”
Sales fell in all price categories, but more sharply on the lower end. Sales of homes priced between $250,000 and $500,000 were down 14% year over year, while sales of those priced between $750,000 and $1 million were down just 3%. Much of that has to do with supply, which is leanest on the lower end of the market.
Prices are still being bolstered by tight supply. There were 1.28 million homes for sale at the end of August, unchanged from a year ago. At the current sales pace, that represents a 3.2-month supply.
“In July, we saw the first sign that the housing market’s refresh may affect homeowners’ eagerness to sell, and that hesitation continued in August, as the number of newly-listed homes sank by 13%,” said Danielle Hale, chief economist for Realtor.com.
Homebuilders have been pulling back in the face of falling demand, but there was a small bump in single-family housing starts in August, according to the U.S. Census. That may have been due to a brief drop in mortgage rates during, which sparked more interest from buyers. But building permits, which are an indicator of future construction, fell as mortgage rates were expected to rise again.