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


A newly sold home is shown on August 12, 2021 in Houston, Texas.

Brandon Bell | Getty Images

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 was 1.5%, which is 0.5% below August 2020. However, they are higher than pre-pandemic levels.

These are the closings of houses and were likely to have been recorded in July or June.

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

According to August’s end, the supply of available homes fell by 1.5% from one month to another to 1.29 million. 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 said that they expect to see more inventory, 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 skewed. While sales for homes below $250,000 declined compared to last year, those above $1,000,000 saw a 40% increase in their numbers.

The 19% of sales that went to first-time buyers has fallen to 19%, which is the lowest percentage since January 2019. 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 tactic. Now, there are 3.8 more offers for a home than there were 4.5 months ago.

According to Mortgage News Daily, mortgage rates started to fall in June. They dropped from 3.25% to a low 2.78% for the 30-year-old popular loan. This was at the beginning of August. 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.

The sales of newly constructed homes rose slightly from month to month, but fell 27% from July 2020. These numbers are based upon signed contracts and not closings.

To keep up with rising costs of land, labor and material, builders have increased their prices. Recent guidance and earnings reports from some of America’s biggest builders have highlighted supply chain problems that hinder production, resulting in fewer home closings.