For homebuyers waiting for the market to cool, fresh existing-home sales data presents a mix of good and bad news.
According to the National Association of Realtors®, existing-home sales fell 2% from July to August, breaking a two-month streak of increases. This metric tracks the sale of single family homes, townhomes, condominiums and co-ops.
August also saw a decrease in inventory and another double-digit increase in year-over-year median sales price. That marks the 114th consecutive month of year-over-year price gains.
While home price and inventory data weren’t especially encouraging for homebuyers, there are signs that the blazing hot 2021 market is cooling.
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The seasonally adjusted annual rate of existing homes sales fell in every market in August. The month-over-month Northeast saw the sharpest drop at 3.2%, followed by the South at 2.6%.
The decline in existing-home sales doesn’t necessarily reflect a drop in demand. Rather, it signifies a more patient and cautious group of buyers.
“Sales slipped a bit in August as prices rose nationwide,” said Lawrence Yun, NAR’s chief economist. “Although there was a decline in home purchases, potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory.”
Notably, first-time homebuyers continue to lose ground to investors and second-home buyers. First-time homebuyers accounted for 29% of sales in August, down from 30% in the previous month and 33% in August 2021.
Meanwhile, investors made up 15% of sales, same as the previous month, and all-cash sales accounted for 22%, up from 18% from last year.
There are still plenty of homebuyers that want to enter the market, but more are finding the current conditions undesirable.
Despite fewer existing-home sales, total housing inventory decreased 1.5% from July to August to 1.29 million units. That’s down 13.4% from last August’s supply of 1.49 million.
Lack of inventory continues to be the Achilles heel of the 2021 housing market and a key driver of price increases. Unsold supply remained unchanged month-over-month, hovering at 2.6 months supply. Six months is considered balanced.
Until home building and more listings replenish supply, home prices will likely continue to rise.
The silver lining of the existing-home sales report is a return of seasonal market patterns. Housing demand and home prices typically peak in late spring and early summer and cool in August and September.
Normally, that’s not seasonality isn’t newsworthy. However, the pandemic jolted the 2020 market off its track and extended the homebuying season well into September and October. According to Redfin, October was the second-busiest month for home sales in 2020.
Instead of heading into the second-busiest month of the year, the 2021 market is showing signs of a seasonal cool off. Home prices were “only” up 14.9% year-over-year in August — the lowest percent change since February. And the non-seasonally-adjusted national median home price decreased from $366,600 in July to $363,800 in August.
Unlike last year, the market seems headed for a much-needed slow season, giving home builders a chance to bring more inventory online and homebuyers a break from record-breaking conditions.
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