U.S. home sales fell in August as supply remained tight, but there are signs the surge in house prices and the COVID-19 pandemic-fueled demand have probably run their course.
Still, prices remain high enough to keep some potential buyers from a hot housing market. The report from the National Association of Realtors on Wednesday showed the smallest share of first-time homebuyers in more than 2-1/2 years and houses continuing to be snapped up typically after only 17 days on the market.
“The recent moderation in existing home sales reflects some easing of the buying frenzy that carried over into early 2021,” said Mark Vitner, a senior economist at Wells Fargo in Charlotte North Carolina. “The frantic race for space sent prices soaring. We continue to expect the housing market to move back into balance over the next couple of years”
Existing home sales dropped 2.0% to a seasonally adjusted annual rate of 5.88 million units last month. Sales fell in all four regions, with the densely populated South posting a 3.0% decline. Economists polled by Reuters had forecast sales would decline to a rate of 5.89 million units in August.
Single-family sales fell 1.9%, while condo/co-op sales dropping 2.8%. The decrease in sales coincided with a recent change in consumer attitudes towards buying a home.
Home resales, which account for the bulk of U.S. home sales, fell 1.5% on a year-on-year basis. The annual comparison was distorted by the pandemic-driven surge in sales in August 2020. Sales are up 16% so far this year compared to the same period in 2020 and remain well above their pre-pandemic level.
The housing market boomed early in the coronavirus pandemic amid an exodus from cities as people worked from home and took classes online, which fueled demand for bigger homes in the suburbs and other low-density areas.
The surge, which was skewed towards the single-family housing market segment, far outpaced supply. Expensive building materials, as well as land and labor shortages, have made it harder for builders to boost production. At the same time, some homeowners are reluctant to sell because of concerns they might not find something affordable, keeping inventory tight.
Government data on Tuesday showed single-family homebuilding fell for a second straight month in August.
Though the pandemic tailwind is fading, demand for housing remains strong thanks to near-record-low mortgage rates and rising wages from a tightening labor market. A separate report from the Mortgage Bankers Association showed a modest rise in applications for loans to purchase a home last week.
Mortgage rates could rise after the Federal Reserve on Wednesday cleared the way to reduce its monthly bond purchases “soon” and signaled interest rate increases may follow more quickly than expected. read more
Stocks on Wall Street were trading higher, recouping some of the recent losses as concerns over a default by Chinese property developer Evergrande eased. The dollar (.DXY) fell against a basket of currencies. Prices of longer-dated U.S. Treasuries rose.