Existing home sales drop 2% as first-time buyers are overpriced

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

Sales were 1.5% lower than in August 2020 for the first annual decline. Sales are still above pre-pandemic levels, however.

These numbers are a tally of house closings and are based on contracts likely signed in June and July.

“The housing industry is clearly taking hold,” said Lawrence Yun, chief economist at Realtors, who called last year’s super surge “an anomaly.”

The supply of homes for sale fell 1.5% month over month to 1.29 million at the end of August. Compared to August 2020, inventories are down 13%, but this comparison has been declining steadily for several months. At the current rate of sales, there was a 2.6 month supply.

“We expect more inventories to become available, perhaps with the end of the moratorium on evictions,” Yun said.

The tight supply pushed the median price of an existing home sold in August to $ 356,700, an increase of 14.9% from August 2020. While the gain is very large, annual comparisons moderate to as sales slow down.

The median is also skewed by stronger activity in the upper segment of the market. Sales of homes priced under $ 250,000 fell from a year ago, while sales of homes priced over $ 1 million jumped 40%.

First-time buyers are clearly struggling with higher prices, falling to just 19% of all sales, the lowest since January 2019. Historically, first-time buyers generally represent 40% of buyers.

Yun said the market was becoming less competitive overall, with buyer traffic decreasing and the number of buyers forgoing inspections, a competitive tactic, also decreasing. The number of offers for a typical home is now 3.8 compared to 4.5 a month ago.

Mortgage rates began to fall in June, from 3.25% to a low of 2.78% on the popular 30-year set in early August, according to Mortgage News Daily. The cut would have helped first-time buyers the most, as they tend to have the least financial leeway and are the most sensitive to interest rates, but they are clearly not helping enough.

Sales of newly built homes in July, which are based on signed contracts, not fences, and therefore would match the latest sales figures for existing homes, edged up month over month, but declined by 27% from July 2020, according to the US census. .

Builders have raised prices to deal with soaring land, labor and material costs. Recent earnings reports and advice from several of the nation’s largest home builders point to supply chain issues hampering production and leading to fewer new home closings.