The turbocharged housing market started to slow in August, as buyers took a step back from what has been a competitive and expensive time to buy a home.
Existing-home sales slipped 2% in August from the prior month to a seasonally adjusted annual rate of 5.88 million, the National Association of Realtors said Wednesday. August sales fell 1.5% from a year earlier.
Months of extreme competition among house buyers has pushed prices sharply higher. Some prospective buyers can no longer afford to buy, and others have taken a break from house hunting after losing out on multiple offers, real-estate agents say.
The pace of home sales remains higher than it was before the Covid-19 pandemic. Low mortgage rates continue to spur robust home-buying demand, and the number of houses for sale is still well below normal for this time of year.
“Clearly the home sales are settling down, but above pre-pandemic conditions,” said Lawrence Yun, NAR’s chief economist. “The high home prices are squeezing away the first-time buyers.”
Economists surveyed by The Wall Street Journal expected a 2% monthly decline in sales of previously owned homes, which make up most of the housing market.
Though prices remain near record highs, the pace of price growth is slowing. The median existing-home price rose 14.9% in August from a year earlier, NAR said, to $356,700. That is down from a nearly 18% increase the prior month.
Many homes are still selling above listing price and receiving multiple offers. The typical home sold in August was on the market for 17 days, unchanged from the prior month, NAR said.
But the share of home listings with a price cut rose for the fourth straight month, to 12.3% in August, according to Zillow Group Inc. Home-price growth slowed in August compared with July in 43 of the country’s 50 biggest metro areas, Zillow said.
“As we start to see the prices get so extreme, we hit a bit of an affordability ceiling for more and more households,” said Skylar Olsen, principal economist at mortgage-finance startup Tomo Networks. “They just cannot compete against the prices that they see.”
There were 1.29 million homes for sale at the end of August, down 1.5% from July and down 13.4% from August 2020. At the current sales pace, there was a 2.6-month supply of homes on the market at the end of August.
The market is especially competitive at lower price points, where buyers with limited cash can be outbid by investors or cash buyers. About 22% of August existing-home sales were purchased in cash, up from 18% a year earlier, NAR said.
“I’ve had a couple of buyers that have said, ‘We’re just going to sit this market out right now, because we’re tired,’” said Latrice McFadden, a real-estate broker in Durham, N.C. “If you’ve submitted five, six, seven offers, 10 offers, whatever, and you get outbid, then you can get buyer fatigue.”
Existing-home sales fell the most month-over-month in the South, down 3%, and in the Northeast and Midwest, both down 1.4%. The West decreased 0.8%
Sales were especially strong at the high end of the market. Sales of homes that were priced at more than $1 million rose 40% in August compared with a year earlier, according to NAR.
The Covid-19 pandemic and increase in remote work enabled many U.S. workers to move farther from their offices in pursuit of more-affordable home prices.
Christine and Chris Levi moved from the Denver area to Atlanta in March for warmer weather and a lower cost of living. They bought their first house, a three-bedroom in Douglasville, Ga., in August for $295,000.
They knew the housing market was competitive. But “we didn’t want to wait and hope that things would calm down, because it hasn’t seemed to in so long,” said Ms. Levi, who works remotely for a software company. “For what we have here, in Colorado it would have been at least $700,000 or more.”
Building activity has increased due to the strong demand, but home builders have sold more homes than they can build and are now limiting sales as they catch up. Housing starts, a measure of U.S. home-building, rose 3.9% in August from July due to an increase in multifamily starts, the Commerce Department said this week. Residential permits, which can be a bellwether for future home construction, rose 6%.
News Corp, owner of the Journal, also operates Realtor.com under license from NAR.