Home sales ‘disappointing again’ – but Fed rate cut could be good for buyers

US existing home sales fell more than expected in August as home prices remained elevated despite continued improvement in supply.

Home sales fell 2.5% last month to a seasonally adjusted annual rate of 3.86 million units, the National Association of Realtors said Thursday.

Economists polled by Reuters had forecast home resales to fall to a rate of 3.90 million units.

Home resales, which make up a large portion of US housing sales, fell 4.2% on a year-over-year basis in August.

The median existing home price rose 3.1% from a year ago to $416,700, the highest on record for any August.

House prices rose in all four regions.

The Federal Reserve cut interest rates by 50 basis points on Wednesday, the first reduction in borrowing costs since 2020. The move could lead to further reductions in mortgage rates, which have retreated to record lows of 1-1 /2-year-old.

Lower mortgage rates could entice more homeowners to put their homes on the market, which could increase supply.

Most homeowners have mortgage rates below 4% and the so-called “rate lock” has eaten away at the market for pre-owned supply homes.

However, lower borrowing costs may stimulate demand that exceeds supply, keeping housing prices high.

Fed Chairman Jerome Powell told reporters on Wednesday that “the real issue with housing is that we’ve had and we’re on track to continue to not have enough housing,” adding “this is not something that the Fed can really adjust, but I think as we normalize rates, you’re going to see the housing market normalize.”

Housing inventory rose 0.7% to 1.35 million units last month. The supply increased by 22.7% from a year ago.

“Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with rising inventory is a powerful combination that will provide the environment for sales to pick up in the coming months,” said Lawrence Yun. , the chief economist of NAR.

At the pace of August sales, it would take 4.2 months to exhaust the current inventory of existing homes, up from 3.3 months a year ago. A supply of four to seven months is seen as a healthy balance between supply and demand.

Properties typically sat on the market for 26 days in August compared to 20 days a year ago.

First-time buyers accounted for 26% of sales, matching the all-time low last seen in November 2021, versus 29% a year earlier.

This percentage remains below the 40% that economists and realtors say is necessary for a strong housing market.

Cash sales accounted for 26% of transactions, up from 27% a year ago.

Troubled sales, including cash liabilities, represented just 1% of transactions, unchanged from last year.