August marked a slowdown in the purchase market, with existing home sales dropping by 2%, according to a monthly report published by the National Association of Realtors. The decline marked a break in two-straight months of increases, the trade group said.
Completed purchase transactions of single-family homes, townhomes, condominiums and co-ops came in at a seasonally adjusted annual rate of 5.88 million in August, NAR said.
Lawrence Yun, chief economist at NAR, noted in a statement that existing home sales slipped because of rising prices nationwide.
“Although there was a decline in home purchases, potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory,” Yun said.
The median price for all housing types was $356,700, up a notable 14.9% from last year’s median price of $310,400. The increase marks 114 straight months of year-over-year gains, the report found.
Yun said that the inflated home prices have made “for an unbalanced market, but prices would normalize with more supply.”
Meanwhile, total housing inventory dried up slightly from the month prior, totaling 1.29 million units at the end of August, down 1.5% from July and down 13.4% on a year-to-year basis, NAR said.
Reacting to NAR’s report, Mike Fratantoni, chief economist at the Mortgage Bankers Association, said that new inventory is expected to come online, with more than 700,000 homes under construction.
Matthew Speakman, economist at Zillow, echoed similar sentiments, remarking that “U.S. home builders started more than 1.6 million homes in August, up 3.9% from July and 17.4% year-over-year.”
Speakman added that signals are emerging “that bode well for buyer confidence” such as a growing share of listed homes that are “undergoing price cuts, and home value growth, while still very fast, was notably slower in August,” which gives some “breathing room” for perspective homebuyers.
NAR’s existing home sales report found that unsold inventory sat on the market at a 2.6-month supply at the current sales pace, unchanged from July, but down from three months in August 2020. Furthermore, properties remained on the market for an average of 17 days in August, also unchanged from July.
The report also concluded that were less first-time homebuyers in the month of August, representing 29% of sales, a dip from 30% in July.
“Securing a home is still a major challenge for many prospective buyers,” said Yun. “A number of potential buyers have merely paused their search, but their desire and need for a home remain.”
Student loan debt may be one of the factors hampering first-time homebuyers and those making over $100,000 from taking the plunge of becoming a homeowner, the trade group added.