The newest data from the National Association of Realtors (NAR) revealed that existing-home sales decreased in August, snapping two months of summer growth.
Total existing-home sales dipped to a seasonally adjusted annual pace of 5.88 million in August, retreating 2.0% monthly and 1.5% yearly. Existing-home sales data tends to follow pending home sales by 45-60 days, and pending home sales receded by about 2% in both June and July. Wells Fargo’s forecast, for example, projected a rate of 5.87 million units, so in some ways, the decline was expected.
Sales of single-family homes retreated 1.9% from July and 2.8% from last year to a pace of 5.19 million units. The annual drop, in part, reflects the summer and early fall bounce-back in single-family home sales last year as buyers scooped up detached properties for want of more space and less density. Condo and co-op sales, which ended August at a rate of 690,000-units, backtracked 2.8% monthly. They are, however, are up 9.5% year over year, as sales of condos and co-ops hadn’t yet picked up by last August.
In commentary released by Wells Fargo, economist Mark Vitner said that August’s sales decline suggests that the homebuying market that has been sizzling over the past year has begun seeing some return to balance.
“The recent moderation in existing home sales reflects some easing of the buying frenzy that carried over into early 2021,” he said. “The frantic race for space sent prices soaring, as demand for larger and more expensive homes increased ahead of the broader housing market. The accelerated migration away from high-cost housing markets also fueled home buying at the upper-end of the housing market, driving the median sales price up much faster than the average sales price.”
This was echoed somewhat by chief economist Lawrence Yun, who said that buyers remain active but are getting less pulled into feverish spending sprees.
“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,” said Yun.
While sales moderated, prices continued to rise, with the median existing-home price in August reaching $356,700. Appreciation has seen easing in the last few months, although August’s median is still up 14.9% year over year. And despite the slowing of sales, entry-level buyers are still finding themselves priced out.
“Notably, the first-time homebuyer share declined again to 29%, highlighting the inventory shortages and fast-rising home prices that continue to challenge prospective buyers,” said Mike Fratantoni, chief economist and senior vice president at the Mortgage Bankers Association. “The inventory of existing homes on the market remains more than 13% below last year’s levels. Fortunately, new inventory is on the way. There are more than 700,000 homes under construction.”