Existing-home sales declined in August as dwindling supply and continued high prices pushed homebuyers to the sidelines
The dog days of summer proved to be unkind to the housing market as August home sales reversed a modest two-month upward trend and fell in all four regions. The reason for the decrease can be squarely attributed to a couple familiar factors: a reduction in nationwide inventory and the resulting uptick in home prices. In fact, median home prices reached $356,700 last month—a 14.9% increase from August 2020 and the 114th straight month of year-over-year gains.
Sales slip month-over-month and year-over year
According to the National Association of Realtors (NAR), total existing home sales decreased 2% from July to a seasonally adjusted annual rate of 5.88 million units. On a year-over-year basis, home sales sank 1.5%. These figures include single-family homes, townhomes, condominiums and co-ops.
Lawrence Yum, chief economist for NAR, noted that despite the drop in sales, buyers are still out there gauging the market. “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."
Inventory fails to increase
Speaking of housing inventory, total housing supply totaled 1.29 million units at the end of August—a decline of 1.5% from July’s numbers and down a whopping 13.4% from one year ago. Drilling deeper into the numbers, unsold inventory at the current pace of sales sits at a 2.6 month supply. That’s the same as July, but a decrease from 3.0 months on a year-over-year basis.
Added Yun, “"High home prices make for an unbalanced market, but prices would normalize with more supply."
Identifying prime areas for new housing
The best way to increase inventory, of course, is through housing starts. By gathering together numerous factors (including months of housing supply, single-family home construction, employment creation, housing vacancy rate, etc.) NAR has come up with the Homebuilders' Local Opportunity Index (HLOI) to measure both short- and long-term local homebuilder opportunities.
To this end, NAR designated five favorable markets this month for new construction, areas where homebuilders can build more homes with less risks for their businesses:
- Spartanburg, S.C
- North Port, Fla
- Knoxville, Tenn
- Wilmington, N.C
- San Antonio, Texas
First-time homebuyers and the current marketplace
First-time homebuyers accounted for 29% of sales in August, a decrease from 30% in July and 33% on an annual basis. Beyond the high sticker prices, a key blocker for a majority of Millennials—the largest homebuying demographic—is the burden of student loan debt, which includes those making over $100,000/year.
"Securing a home is still a major challenge for many prospective buyers," said Yun. "A number of potential buyers have merely paused their search, but their desire and need for a home remain.
Existing home sales (August 2021)
All four national regions experienced a decrease in home sales in August. This was evident on a monthly basis as well as a year-over-year comparison.
- Northeast: down 1.4% to an annual rate of 730,000—2.7% lower than last year
- Midwest: down 1.4% to an annual rate of 1,370,000—2.1% lower than last year
- South: down 3% for an annual rate of 2,550,000—0.8% lower than last year
- West: down 0.8% to an annual rate of 1,230,000—1.6% lower than last year
Median existing home price (August 2021)
All four regions saw median home prices climb upwards on an annual basis. Across all housing types, the median existing home price rose 14.9% from August 2020, marking 114 straight months of year-over-year gains.
- Northeast: $407,800—up 16.8% from last year
- Midwest: $272,200—up 10.5% from last year
- South: $303,200—up 12.8% from last year
- West: $507,900—up 11.4% from last year
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