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Real estate professionals are ready to put a “disappointing” summer homebuying season in the rearview mirror and look ahead to what could be a more lively fall market. The signs may already be appearing: More homes are being listed for sale, offering home buyers more choices—and lower mortgage rates could help lower borrowing costs.
There’s hope for a turnaround, even as the National Association of REALTORS® released its latest housing data Thursday showing that total existing-home sales—completed transactions for single-family homes, townhomes, condos and co-ops—fell 2.5% in August compared to July. Home sales are down 4.2% compared to a year ago.
“Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months,” says NAR Chief Economist Lawrence Yun. “The homebuying process, from the initial search to getting the house keys, typically takes several months.”
Prospective home buyers likely will find more housing choices this fall. Total housing inventory at the end of August was 1.35 million, up about 23% from a year ago. Unsold inventory is at a 4.2-month supply at the current sales pace, NAR reports.
“The rise in inventory—and, more technically, the accompanying months’ supply—implies home buyers are in a much-improved position to find the right home and at more favorable prices,” Yun says. Also, homes are staying on the market longer, which could give buyers more time to make a purchase decision. Properties typically remained on the market for 26 days in August 2024, up from 20 days a year ago.
“However, in areas where supply remains limited, like many markets in the Northeast, sellers still appear to hold the upper hand,” Yun adds.
Home buyers will still have to contend with high home prices. The median existing-home price for all housing types in August was $416,700, up 3.1% from a year ago, NAR reports. All four major regions of the U.S. posted home price increases last month, led by the Northeast, which saw prices surge nearly 8% last month.
Prospective buyers may find that lower mortgage rates help offset higher home prices. The 30-year fixed-rate mortgage averaged 6.2% as of Sept. 12, down from 7.18% a year ago, according to Freddie Mac. Also, the Federal Reserve voted on Wednesday to lower its federal funds rate for the first time in four years. If the Fed continues to decrease its benchmark rate, it could eventually help push mortgage rates even lower. Already, lower mortgage rates compared to the spring are helping to improve purchasing power for many home buyers, equating to about $50,000 in savings for those with a $2,000 monthly mortgage payment, Yun says. “Consumers who were priced out due to earlier higher mortgage rates could now be back in the market,” he says.
Fewer First-Time Buyers, More Competition
As home prices remain elevated, more prospective first-time home buyers may be waiting on the sidelines for lower prices and even lower rates. First-time buyers comprised 26% of sales in August, matching an all-time low last recorded in November 2021, according to NAR.
Home buyers paying all cash remain a major force in the housing market. All-cash sales comprised 26% of transactions in August, down only slightly from 27% a year ago. Individual investors and second-home buyers tend to make up the biggest bulk of cash sales. They purchased nearly 20% of homes in August, up from 16% a year earlier.
Regional Breakdown
Here’s a closer look at how existing-home sales fared in August across the country:
- Northeast: Sales dropped 2% from July, reaching an annual rate of 480,000 and matching levels in August 2023. Median price: $503,200, up 7.7% from last year.
- Midwest: Sales were unchanged from July at an annual rate of 920,000. But sales were down 5.2% compared to a year ago. Median price: $315,400, up 3.8% from August 2023.
- South: Home sales dropped 3.9% from July, reaching an annual rate of 1.73 million. Existing-home sales were down 6% from a year ago. Median price: $367,000, up 1.6% from one year earlier.
- West: Home sales fell 2.7% in August, settling in at an annual rate of 730,000. Home sales are down 1.4% from a year ago. Median price: $622,500, up 2.2% from August 2023.
