Sales of previously occupied U.S. homes declined in August to their slowest annual pace in more than a year, as buyers contended with increasing mortgage rates and home prices. The National Association of Realtors reported that existing home sales fell 2% from July to a seasonally adjusted annual rate of 3.98 million units, marking the third consecutive monthly decrease.
This represents a 1.2% decrease compared to August of the previous year and fell slightly short of the 4 million pace economists had anticipated. The current sales pace has been hovering around 4 million units since the start of 2023, significantly below the historical norm closer to 5.2 million units. The last time the annual sales pace was below 4 million was in June 2025.
Despite the recent slowdown, U.S. home sales are up 1.6% for the first eight months of this year compared to the same period in 2025.
The housing market's performance has been largely hampered by rising borrowing costs. Mortgage rates have climbed significantly since late February, influenced by expectations of higher inflation driven by surging oil prices following the conflict between the U.S. and Iran. The average rate for a 30-year mortgage reached 6.76% this week, its highest point in over 14 months, and is projected by some to reach 7%.
Home Prices Reach Record Highs
Even as sales softened, national home prices continued to climb in August. The U.S. median sales price rose 1.6% from the previous year to $429,100, an all-time high for August based on data dating back to 1999. Home prices have seen year-over-year increases for 38 consecutive months.
The U.S. housing market has experienced a slump since 2022, when mortgage rates began to rise from pandemic-era lows. Sales last year were essentially flat, remaining at a 30-year low. Years of dramatic home price increases, particularly in the early 2020s fueled by low mortgage rates, have priced many potential buyers out of the market. A persistent shortage of available homes, partly due to years of below-average new home construction, has also helped maintain high prices despite the sales slump.
Many homes sold in August likely went under contract in July and June, when the average 30-year mortgage rate ranged from 6.43% to 6.66%.
Inventory and Buyer Dynamics
Regionally, sales decreased from July to August in the Northeast, Midwest, and South, while remaining flat in the West. Prices continued to increase year-over-year in the Northeast at a faster rate than the rest of the country, rising 4.3%, attributed to a relative shortage of homes compared to other regions.
The slowdown in sales has led to unsold properties remaining on the market longer, contributing to an increase in available homes. Although inventory levels remain below historical norms, 1.62 million homes were unsold at the end of August, a 3.2% increase from July and a 5.9% increase from August last year. This figure is still below the approximately 2 million homes typically for sale before the COVID-19 pandemic.
August's end-of-month inventory translates to a 4.9-months’ supply at the current sales pace, the highest level in over a decade. A supply of 4 to 6 months is traditionally considered a balanced market.
The rise in available homes could offer greater selection and potential negotiating power for buyers who can afford current mortgage rates or purchase with cash. In August, the national median home listing price decreased by 1.2% compared to the previous year, and approximately 20% of listings saw a price reduction.
First-time buyers constituted 30% of home purchases last month, a slight increase from 29% in July and 28% in August last year. Historically, first-time buyers represent closer to 40% of home sales. Affordability remains a significant concern for home shoppers, as home prices, mortgage rates, property taxes, and insurance costs are substantially higher than a few years ago.