Sales of previously occupied U.S. homes plunge 21% over year, new housing data shows

The number of previously occupied homes sold in the United States dropped by 21% over the past year, according to new data from the National Association of Realtors (NAR) released Thursday.

That’s on top of an 18% annual decline the year before, indicating the housing market has continued to slow down amid rising interest rates. Meanwhile, prices continued to rise, with the median sales price climbing 3.9% from a year ago to reach $407,100.

“Perhaps there could be some recovery taking place, but the last couple of data releases are implying no,” said Lawrence Yun, the NAR’s chief economist. “Things are slumping down again.”

The 21% drop compares homes sold from January through August this year with the same period last year. August home sales fell 15.3% this year compared to August 2022, the NAR explained.

The housing market has broadly slowed down over the past year as the Federal Reserve has increased interest rates, as part of its campaign to fight inflation. Higher interest rates have made it more expensive for home buyers to finance their homes with mortgages, ratcheting up the costs for all but the most cash-rich buyers.

Fed Chair Jerome H. Powell has further dampened hopes of the central bank easing policy anytime soon, saying Wednesday that inflation needs to fall more before interest rates can come down. Even though the Fed opted not to raise rates this time, most officials think it will need to do so once more before the end of the year, while chances of significant rate cuts in 2023-25 are diminishing.

All this news comes as a disappointment to recent home buyers who had hoped to refinance at a lower rate, and it worsens home affordability for the foreseeable future, experts say. Home buyers now face higher borrowing costs, lower inventory, and prices that still keep rising despite the housing market’s slowdown.

“This tells us that there is a shortage of homes, affordable or unaffordable, and that upward pressure on home prices will continue, shutting a generation out of the housing market,” said Chris Rupkey, chief economist at FWDBonds LLC. Rising home prices also make it less likely that the Fed will lower rates in 2024, because doing so could set off a storm of buying activity, he added.

At the root of the problem is a dearth of inventory, experts say. The NAR counts 1.1 million homes on the market at the end of August ― a 14% drop from a year ago and the worst inventory figure for the month of August since 1999.

Many homeowners who are thinking of selling remain reluctant to pay off mortgages they bought years ago at lower rates, only to buy a new home at much higher financing costs.

Home builders, meanwhile, are building new homes at a slower rate as their loans are also more expensive, Yun said.

“With the inventory shortage and housing shortage in America, the builders really cut back last month … that was really disappointing,” Yun said. Builders appear to be “taking advantage of the fact that inventory is so low,” he added, noting that stock prices for several publicly traded home builders have soared over the past year.