August Existing-Home Sales Dip 2.5%: What It Means for Buyers and Sellers

The real estate market is a dynamic landscape, constantly shifting in response to economic factors, buyer preferences, and global events. According to the latest report from the National Association of REALTORS® (NAR), existing-home sales dipped by 2.5% in August 2024, settling at a seasonally adjusted annual rate of 3.86 million. This marks a 4.2% decline from the same period last year. But what does this mean for buyers and sellers in today’s market? Let’s delve into the details.

Key Highlights

• Sales Decline: Existing-home sales decreased by 2.5% from July and 4.2% year-over-year.
• Price Increase: The median existing-home sales price rose 3.1% to $416,700.
• Inventory Growth: Unsold inventory improved by 0.7% to 1.35 million units, equivalent to a 4.2-month supply.
• Regional Variations: Three out of four major U.S. regions saw sales declines, with the Midwest remaining stable.

Understanding the Sales Dip

Lawrence Yun, NAR Chief Economist, commented on the recent trends:

“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. The home-buying process, from the initial search to getting the house keys, typically takes several months.”

This suggests that while sales have dipped, the market conditions are setting the stage for a potential rebound. Lower mortgage rates and increased inventory could attract more buyers, balancing the market dynamics.

Inventory on the Rise

The total housing inventory at the end of August stood at 1.35 million units, a slight 0.7% increase from July and a significant 22.7% rise from one year ago. This equates to a 4.2-month supply at the current sales pace, up from 4.1 months in July and 3.3 months in August 2023.

Yun adds:

“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. However, in areas where supply remains limited, like many markets in the Northeast, sellers still appear to hold the upper hand.”

Median Home Prices Climb

Despite the dip in sales, home prices continue to rise. The median existing-home price for all housing types in August was $416,700, marking a 3.1% increase from August 2023. All four U.S. regions reported price gains, with the Northeast experiencing the highest increase.

Challenges for First-Time Buyers

First-time buyers accounted for only 26% of sales in August, matching the all-time low last seen in November 2021. This is down from 29% in both July 2024 and August 2023. Factors contributing to this decline may include rising home prices and competition from investors.

Mortgage Rates Offer Relief

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.2% as of September 12, down from 6.35% one week prior and 7.18% one year ago. Lower mortgage rates can improve affordability for buyers, potentially stimulating increased activity in the housing market.

Regional Breakdown

• Northeast: Sales decreased by 2.0% from July but remained stable year-over-year. Median price increased by 7.7% to $503,200.
• Midwest: Sales were unchanged from July but down 5.2% year-over-year. Median price rose 3.8% to $315,400.
• South: Sales declined by 3.9% monthly and 6.0% annually. Median price increased by 1.6% to $367,000.
• West: Sales fell 2.7% from July and 1.4% year-over-year. Median price grew by 2.2% to $622,500.

What This Means for Sellers

For homeowners considering selling, the current market presents both opportunities and challenges:

• Opportunities: Rising home prices can lead to higher profits. Increased inventory levels might attract more serious buyers.
• Challenges: With more homes on the market, competition increases. Pricing your home competitively and ensuring it stands out is crucial.

What This Means for Buyers

Buyers may find the increasing inventory and lower mortgage rates advantageous:

• Opportunities: More homes to choose from and potentially better negotiating power.
• Challenges: Home prices are still on the rise, and first-time buyers face stiff competition from investors and cash buyers.

Tips for Navigating the Current Market

For Sellers:

1. Price Competitively: Research comparable homes in your area to set a realistic price.
2. Enhance Curb Appeal: Small improvements can make a big difference in attracting buyers.
3. Work with a Professional: An experienced real estate agent can provide valuable insights and marketing strategies.

For Buyers:

1. Get Pre-Approved: Strengthen your bargaining position by securing financing ahead of time.
2. Act Quickly: With desirable properties moving fast, being decisive is key.
3. Stay Informed: Keep an eye on market trends and be prepared to adjust your strategy.

The Investor’s Perspective

All-cash sales accounted for 26% of transactions in August, slightly down from 27% in July and August 2023. Investors and second-home buyers purchased 19% of homes, indicating robust activity in this segment despite the overall sales decline.

Looking Ahead

While the current numbers indicate a slowdown, the combination of lower mortgage rates and increasing inventory suggests potential for market stabilization or growth in the coming months. As Yun mentioned, the home-buying process takes time, and these favorable conditions could lead to increased activity as we move forward.

Final Thoughts

The real estate market’s ebb and flow require both buyers and sellers to stay adaptable. Whether you’re looking to purchase your first home, upgrade, downsize, or invest, understanding the current trends can help you make informed decisions.

If you’re considering making a move, now is a great time to consult with a real estate professional to navigate this evolving market effectively.