Sales of previously owned US homes fell in August, according to industry data released Thursday, but lower mortgage rates and growing supply were likely to boost the industry.
Existing home sales dropped 2.5 percent last month from July to an annual rate of 3.86 million, seasonally adjusted, said the National Association of Realtors (NAR).
This was largely in line with the 3.90 million consensus that analysts expected.
“Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months,” said NAR chief economist Lawrence Yun.
Homebuyers in the United States have been grappling with a sharp rise in mortgage rates after the US central bank rapidly lifted the benchmark lending rate in 2022 to tackle inflation.
But with growing expectations that the Federal Reserve was going to pivot to rate cuts after holding rates at a decades-high level for months, mortgage rates have also shifted lower.
The popular 30-year fixed-rate mortgage averaged 6.2 percent as of September 12, according to mortgage finance firm Freddie Mac — reaching the lowest level since February 2023.
A year ago, the rate was around 7.2 percent.
On Wednesday, the Fed kicked off a process of easing monetary policy with a bold half-percentage-point rate reduction, adding to expectations that mortgage rates would fall further.
“Existing home sales fell to a 10-month low in August, but forward looking indicators like mortgage applications point to a pickup in sales in September and October,” said economist Nancy Vanden Houten of Oxford Economics.
But Oliver Allen of Pantheon Macroeconomics cautioned that a mortgage rate of six percent remains “well above the average rate of about four percent on the stock of existing mortgages.”
“So moving home and taking out a new mortgage still requires a prohibitive jump in monthly payments for most current homeowners,” he said in a note.
“As such, a constrained supply of existing homes for sale will continue to hold back sales,” Allen added.
Compared with a year ago, NAR data showed that existing home sales were 4.2 percent down in August.
The median price increased 3.1 percent from August 2023 to $416,700, with all four US regions seeing price jumps.
Yun told a media call on Thursday that although home sales are struggling, home prices remained high.