Existing Home Sales Fell Nearly 20% in August
September 20, 2022
Sales of existing homes declined for the seventh consecutive month in August as surging mortgage rates and high prices continued to push prospective buyers out of the market.
Sales were down 19.9% from a year earlier, according to data from the National Association of Realtors. The month’s sales were the weakest since May 2020, when sales came to a halt during the early days of the pandemic lockdown. Aside from that, sales last month were the weakest since November 2015.
Year-over-year sales declined across all price categories, but the drop was steepest among low-priced homes.
Despite slowing sales, home prices continued to climb during the month. However, price growth was at its lowest year-over-year level since June 2020. The median home price was $389,500 last month, up 7.7% from a year ago.
On a month-to-month basis, sales were down only 0.4% from the month prior, giving some industry analysts hope that the market may be stabilizing, but much of that depends on whether mortgage rates continue to climb. The average rate on a 30-year fixed-rate mortgage topped 6% last week. That’s the highest it has been since 2008 and more than double what it was a year ago.
Higher mortgage rates not only make borrowing more prohibitive for prospective buyers, but they also make sellers more reticent to put their homes on the market, as they are locked in at much lower rates.
This so-called “staying put” effect is keeping the inventory of homes at a historic low. The inventory of homes for sale at the end of August was down 1.5% from July and unchanged from the previous year, at 1,280,000 units. At the current sales pace, it would take just 3.2 months to deplete that inventory. Historically, a balanced housing market would have roughly 4-5 months’ inventory.