Existing home sales fall 2% as first-time buyers are priced out

Sales of previously owned homes declined 2% in August from July to a seasonally adjusted annualized rate of 5.88 million units, according to the National Association of Realtors.

The first annual drop in sales since August 2020 was 1.5%. However, the sales numbers are higher than pre-pandemic.

These figures are an estimate of the number of homes that have closed. They are likely to be based on July and June contracts.

Lawrence Yun (chief economist at the Realtors), said that “the housing sector is clearly slowing down.” He called last year’s “atypical” super-surging.

At the end August, there was a 1.5% drop in supply from month to month to 1.29million. The inventory has fallen 13% compared to August 2020. But, that number has been decreasing steadily for several months. There was a supply of approximately 2.6 months at the current sales rate.

Yun indicated that there was more inventory expected, possibly due to the ending of the moratorium on evictions.

In August, the median sale price of an existing house was $356700. That’s an increase of 14.9% over August 2020. Although the increase is significant, sales slowdowns mean that annual comparisons have been declining.

Due to stronger activity in the upper market, the median may be distorted. The sales of houses priced under $250,000 decreased compared to a year earlier, but the number of homes sold for more than $1 million increased 40%.

The 29% drop in sales for first-time buyers, which is the lowest percentage since January 2019, clearly shows that they are struggling to buy homes at higher prices. In the past, 40% of first-time buyers have been buyers.

Yun claimed that overall the market has become less competitive. Yun also stated that buyer traffic is declining, while the number buyers willing to waive inspections, which can be a very competitive strategy, are all falling. Average home sales now have 3.8 offers, compared to 4.5 months ago.

Mortgage News Daily reports that mortgage rates fell from 3.25% in June to a minimum of 2.78% by August’s end. First-time buyers are most affected by interest rates and would benefit most from the drop. They have less financial flexibility, are more sensitive to them, and have the lowest rate of return.

According to the U.S. Census, sales of new homes increased slightly in July based on contracts signed, but not closings. However, they were 27% less than July 2020.

To keep up with rising costs of land, labor, and materials builders have raised prices. Many of the country’s top builders have recently released their earnings and provided guidance. They noted supply chain issues which are limiting production and resulting in fewer closings.

Correct: August 2020 saw a 1.5% decline in existing home sales, marking the 14-months first annual drop. The drop was mischaracterized in an earlier version. The share of first-time buyers in all sales fell to 29%. In an earlier version, the percentage was not correct.

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