After months of competition for homes that drove prices to record highs, many buyers took a break last month. The National Association of Realtors (NAR) reports existing home sales declined 2% in August from July and were 1.5% lower than in August 2020.
Even so, sales remain higher than before the pandemic. So do prices. The median home sale price in August was $356,700, up 14.9% from August 2020. NAR says prices were up in every region of the country and caused many would-be buyers to pause their search.
"Sales slipped a bit in August as prices rose nationwide," said Lawrence Yun, NAR's chief economist. "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 has been a major impediment to the housing market over the last several years. People are remaining in their homes longer than in years past and builders have slowed construction activity in the face of rising costs.
According to NAR, the total housing inventory at the end of August was just 1.29 million units, down 1.5% from July's supply and down 13.4% from one year ago. Unsold inventory is at a 2.6-month supply at the current sales pace, unchanged from July but down from three months in August 2020.
Yun says record-high prices make for an unbalanced housing market but that price inflation would slow considerably if there were more homes for sale. But unless there is a steep decline in demand or homebuilders get busy, that’s unlikely to happen in the short run.
Not as much demand for second homes
In a separate report, real estate broker Redfin said demand for second homes fell sharply in August, declining nearly 20% from August 2020. The company attributes the drop to last summer’s surge in second home purchases.
"The pandemic isn't over, but the desire to escape isn't as intense as it was before,” said Taylor Marr, Redfin's lead economist. "People are increasingly returning to life as normal, with kids going back to school and cities coming to life again. The housing market as a whole is still booming, just not as strongly as it was in the second half of 2020.”
Marr says competition, migration, and home-sales growth have all slowed in the last 12 months.