US Home Sales Slowest in More Than a Year as Mortgage Rates and Prices Climb

Existing US home sales have reached their lowest pace in over a year, according to the National Association of Realtors, with mortgage rates continuing to rise and home prices showing no signs of abating. This perfect storm of increasing costs has left potential homebuyers frozen out of the market, struggling between soaring prices and ever-higher borrowing costs.

The decline in home sales is not solely a result of rising mortgage rates but also reflects broader economic trends shaping the housing market over years. The pandemic-era lows in mortgage rates are now a distant memory, leaving behind record-high home prices. In August, the national median sales price reached an all-time high of $429,100, up 1.6% from last year and continuing a streak of annual increases that spans 38 months.

Despite slowing sales, home inventory levels have begun to rise – albeit slowly. At the end of August, there were 1.62 million unsold homes on the market, representing a 3.2% increase from July and a 5.9% increase from last year. While this may seem like good news for buyers, it signals that sellers are having trouble finding buyers willing to pay top dollar in the current market.

Affordability remains a concern for all buyers, not just first-time homebuyers. With mortgage rates at their highest level in over 14 months (6.76% on the benchmark 30-year mortgage) and home prices continuing to rise, many potential buyers are being priced out of the market altogether. As Heather Long, chief economist at Navy Federal Credit Union, noted, “It’s not a good time to sell your home” – or, by extension, buy one.

The housing market has been in decline since 2022, when mortgage rates began their upward climb from pandemic-era lows. Since then, sales of previously occupied US homes have been stuck at a 30-year low, indicating that the trend is unlikely to reverse anytime soon. The question is: what does this mean for the broader economy? Will the continued slowdown in home sales be a drag on economic growth, or will other sectors pick up the slack?

The chronic shortage of homes for sale nationally and years of below-average new construction have created a perfect storm that’s driving prices ever higher. While some may see this as an opportunity to buy in a “seller’s market,” the reality is that homebuyers are facing unprecedented challenges.

As we look ahead to the coming months, one thing is clear: the housing market is at a critical juncture. Buyers and sellers must find a new equilibrium, or the trends of the past few years will continue to shape the market. Time will tell – but for now, it’s evident that the home sales slump is far from over.

The slowest pace in home sales since 2023 may not be as alarming as it sounds, given the broader context. However, what’s truly remarkable is the persistence of record-high home prices despite a slowdown in sales. This serves as a reminder that the housing market is influenced by factors beyond supply and demand – psychological factors like fear and uncertainty also play a significant role.

For homeowners eager to sell, the message is clear: it’s not a good time to put your house on the market. But for buyers, there may be opportunities to be had – especially if you’re willing to take on a mortgage with rates that are higher than ever before. The question remains: can homebuyers afford to wait?