US existing home sales dropped for the seventh straight month in August as affordability deteriorated further amid surging mortgage rates and stubbornly high house prices, though the pace of decline moderated from prior months.
Existing home sales slipped 0.4% to a seasonally adjusted annual rate of 4.80 million units last month, the National Association of Realtors said on Wednesday.
Discounting the plunge during the spring of 2020 when the economy was reeling from the first wave of Covid-19, this was the lowest sales level since November 2015.
Economists polled by Reuters had forecast sales decreasing to a rate of 4.70 million units. Sales rose in the Northeast and West, but were unchanged in the densely populated South. They fell in the Midwest.
Home resales, which account for the bulk of US home sales, decreased 19.9% on a year-on-year basis.
The Federal Reserve’s aggressive monetary policy tightening, marked by oversized interest rate increases, has significantly weakened the housing market. In contrast, other sectors of the economy, like the labour market, have shown incredible resilience despite the Fed’s attempts to cool demand.
Data this week showed confidence among single-family homebuilders eroding for the ninth straight month in September, while permits for future homebuilding tumbled to the lowest level since June 2020 in August. read more
The Fed is expected to raise its policy rate by 75 basis points later on Wednesday for the third time in as many policy meetings. Since March, the US central bank has lifted that rate from near zero to its current range of 2.25% to 2.50%.
Mortgage rates, which move in tandem with US Treasury yields, have soared even higher. The 30-year fixed mortgage rate averaged 6.02% last week, from 5.89% in the prior week, breaking above 6% for the first time since November 2008, according to data from mortgage finance agency Freddie Mac.
Though house price growth has slowed as demand weakened, tight supply is keeping prices elevated. The median existing house price increased 7.7% from a year earlier to $389,500 in August. There were 1.28 million previously owned homes on the market, unchanged from a year ago.
At August’s sales pace, it would take 3.2 months to exhaust the current inventory of existing homes, up from 2.6 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
Properties typically remained on the market for 16 days. First-time buyers accounted for 29% of purchases, unchanged from July and a year ago. All-cash sales made up 24% of transactions, up from 22% from a year ago.