US home sales and prices fell in August as mortgage rates rose

US existing home sales and prices declined in August from the previous month as mortgage rates rose towards their highest level in 14 years.

The National Association of Realtors said Wednesday that sales of previously owned homes fell 0.4% in August from July to a seasonally adjusted annual rate of 4.8 million, the weakest rate since May 2020. August sales were down 19.9% ​​from a year earlier.

The housing market has slowed in recent months — with seven months of declining monthly sales through August — as the Federal Reserve aggressively raised interest rates to cool the economy and bring down soaring inflation. This has driven up mortgage interest rates and increased borrowing costs for homebuyers by hundreds of dollars a month, driving many out of the market. The average 30-year mortgage rate was 6.02% in the week ending September 15, up from 2.86% a year earlier, according to housing finance agency Freddie Mac.

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But the number of homes for sale is still below normal levels. While home prices have fallen from their spring peaks in some markets, prices are still higher than they were a year ago.

The median existing home price rose 7.7% in August from a year earlier, to $389,500, the agency said. Prices fell month on month for the second month in a row after hitting a record $413,800 in June. While prices typically fall in late summer, the monthly declines have been larger than usual, said Lawrence Yun, NAR’s chief economist.

“It is clear that the high mortgage rate has hampered the housing market,” said Mr. Yun.

Economists polled by the Wall Street Journal expected a 2.7% monthly decline in August in sales of previously owned homes, which make up most of the housing market.

The combination of higher prices and higher interest rates has pushed home-buying affordability near its lowest level in decades, making it difficult for first-time buyers to enter the market.

General economic uncertainty is also keeping buyers on the sidelines, according to Odita Koshi, deputy chief economist at First American Financial Corp. “To make the biggest financial decision of your life, you need some confidence in the economy, in your job, in the job market.”

Philip Natalie went under contract to purchase a new home in Henderson, Nevada, in December. By the time he set his interest rate this spring, rates had risen from about 3% to more than 5%, raising his monthly payments by several hundred dollars.

“It’s horrible,” he said, but he hopes to refinance the loan at a lower rate within the next year or two. “The first batch of 12 to 18 batches is likely to be a big problem,” he added.

To save costs, Mr. Natalie eats less and decides to postpone the purchase of a car. “I don’t want to feel the pressure of adding a car at the same time I’m buying a house,” he said.

In the four weeks to September 11, 7.2% of homes on the market each week saw a price drop, up from 3.8% a year ago, according to real estate brokerage Redfin Corp. Homes were sold on average 0.5% below their end. List price, compared to 1.1% higher than the previous year’s list price.

The typical home sold in August was on the market for 16 days, up from 14 days from the previous month, the agency said.

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Nationwide, there were 1.28 million homes for sale or under contract at the end of August, down 1.5% from July and unchanged from August 2021, NAR reported. At the current sales pace, there was a 3.2-month supply of homes on the market at the end of August.

Charlie and Ashley Richards, 29, began shopping for their first home in Charleston, South Carolina, in June after discovering their rent was going up by $800 a month.

“We got into the market just in time. Things were starting to slow down a little bit,” Mr. Richards said. “There were a few homes that we looked at that had been on the market for 30 to 60 to 90 days.”

They bought a house this month about 3% below asking price. “I’m very excited,” said Mr. Richards.

First-time buyers’ market share was 29% in August, unchanged from the previous year. About 24% of existing home sales in August were purchased with cash, NAR said, up from 22% in the same month a year ago.

On a monthly basis, existing home sales in the Midwest fell 3.3%. Sales were unchanged in the South and rose slightly in the West and Northeast.

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The National Association of Home Builders said this week that a gauge of homebuilders’ confidence in the United States fell for the ninth consecutive month in September to the lowest level since May 2020. About a quarter of construction workers surveyed said they cut prices in the past month, according to the NAHB.

This week, the Commerce Department said that US homebuilding, up 12.2% in August compared to July. However, residence permits, which could be a pioneer for future home construction, fell by 10%.

News Corp., owner of The Wall Street Journal, also operates under license from NAR.

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