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Existing home sales fall in August, and prices soften significantly

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Existing home sales fell 0.4% in August from July to a seasonally adjusted annual rate of 4.8 million units, according to the National Association of Realtors. This is the slowest pace of sales since June 2020, when activity came to a very temporary halt due to the start of the pandemic.

Otherwise, it is the slowest pace since November 2015. Sales are down 19.9% ​​from August 2021.

Since sales represent earnings, the deal was likely signed in June and July, when mortgage rates spiked and then fell. Average interest rates on popular 30-year fixed mortgages started at around 5.5% in June, and by mid-month he was above 6%, according to Mortgage News Daily. After that, he remained in the 5.7% range for much of July, before dropping further to the 5% range at the end of the month.

This year the 30 year fixed interest rate started at 3%. It is now close to 6.5%.

Prices were still higher than they were a year ago, even though interest rates made housing more affordable. The average price of a pre-owned home sold in August was $389,500, up 7.7% from a year ago. House prices historically fall from July to August due to seasonality, but this year’s decline is larger than usual, suggesting a significant softening.

From June to August, it usually drops around 2%, but this year it’s down around 6%.

“The housing market is showing the immediate impact of the change in monetary policy,” said Lawrence Yun, chief economist at the real estate firm, who said he would further revise down annual sales forecasts due to higher mortgage rates. “Prices may be falling in some markets.”

Sales fell across all price tiers, but fell more sharply in the lower price tiers. Sales of homes priced between $250,000 and $500,000 were down 14% year-over-year, while sales of homes priced between $750,000 and $1 million were down just 3%. A lot of it has to do with supply, making it the leanest in the lower end of the market.

Prices continue to rise as supplies are tight. The number of units sold at the end of August was 1.28 million units, unchanged from the previous year. At the current pace of sales, this equates to 3.2 months of supply for him.

“July saw the first signs that the housing market update could affect homeowners’ willingness to sell. The hesitation continued as realtors.com fell 13%.

Homebuilders are retreating in the face of falling demand, but single-family home starts rose slightly in August, according to the US Census. This may have been due to a temporary drop in mortgage rates, which increased buyer interest. However, building permits, an indicator of future construction, fell as mortgage rates were expected to rise again.

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