Home sales slip, prices slowly rising in August

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Sales of previously occupied U.S. homes slowed in August for the seventh consecutive month as sharply rising mortgage rates and rising prices made buying a home less affordable, further cooling the once-hot real estate market.

The National Association of Realtors said Wednesday that sales of existing homes fell 0.4% last month from July to a seasonally adjusted annual rate of 4.80 million. That’s more than economists expected, according to FactSet.

Sales fell 19.9% ​​from August last year and are now at the slowest annual pace since May 2020, near the start of the pandemic.

The national median home price jumped 7.7% in August from a year earlier to $389,500. As the housing market has cooled, house prices have risen at a more subdued pace after jumping about 20% a year earlier this year. Before the pandemic, the median house price was rising about 5% per year.

“Rising mortgage rates have clearly hurt the housing market,” said Lawrence Yun, chief economist at NAR.

The August sales report is the latest evidence that the housing market, a key driver of economic growth, is slowing from its torrid pace in recent years as homebuyers grapple with the lowest mortgage rates. highest in more than a decade, and inflation hovering near a four-decade high.

The average rate on a 30-year home loan rose to 6.02% last week, surpassing 6% for the first time since 2008, according to mortgage buyer Freddie Mac. A year earlier, the rate averaged 2.86%.

The last time the average long-term rate was this high was in November 2008, just after the housing market crash triggered the Great Recession.

Mortgage rates eased in July after climbing in June, which may have helped to motivate homebuyers last month, limiting the decline in sales. More recently, however, rates have risen again with the 10-year Treasury yield influencing home loan rates. The 10-year yield traded Tuesday at its highest level since 2011, reflecting expectations of further interest rate hikes by the Federal Reserve in its bid to crush inflation.

Rising home prices and mortgage rates have pushed mortgage payments on a typical home from $897 to $1,643 per month, an 83% increase over the past three years, according to company analysis Zillow real estate information.

Soaring home loan rates aren’t just making homes less affordable, they’re also discouraging homeowners who’ve locked in ultra-low rates for the past two years from buying a new home. This, in turn, can limit the number of homes available for sale.

“This lockdown effect continues to impact stocks and I think it will continue to impact stocks in the future,” Yun said.

Some 85% of US homeowners with mortgages now have rates well below 6%, according to Redfin. The disparity has less of an incentive for these homeowners to sell and buy another home because accepting a higher mortgage rate would mean paying more over the life of the loan and also in larger monthly payments.

In the four weeks to September 11, real estate listings fell 19% from a year earlier, the biggest drop since May 2020, the real estate brokerage found.

Some 1.28 million homes were on the market at the end of August, down 1.5% from July and flat from August last year, NAR said.

On average, homes sold in just 16 days after going on the market last month, compared to 14 days in July. Before the pandemic, homes typically sold more than 30 days after they went on sale.

At the current rate of sales, the level of properties for sale stands at 3.2 months supply, Yun said. That’s unchanged from July and higher than the 2.6-month supply in August of last year. In a more balanced market between buyers and sellers, there is a 5-6 month supply.

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