Existing home sales slide once more in August

Summary

Worsening affordability fuels the long slide in resales, with little relief on the horizon

Existing home sales inched down 0.7% in August as resales continue to be constrained by low inventory and rising borrowing costs. The 4.04 million-unit sales pace is the slowest since January and the second slowest pace since October 2010, when the housing market was recovering still in recovery from the housing market crash. August's turnout continues the long slide in existing home sales, which have fallen 17 of the past 19 months, and are now down 15.3% over the year. Elevated mortgage rates continue to be a prohibitive force and thus will weigh on demand for the foreseeable future. The outlook for a persistently high financing cost environment was affirmed by the FOMC's September meeting yesterday in which it communicated a higher for longer interest rate outlook with minimal cuts projected for 2024.

Meanwhile, lean inventories of homes for sale continue to support prices. The median single-family home price rose 0.6% over the month—the sixth monthly increase in seven months. The climb in resale prices has disenchanted would-be buyers who have increasingly turned towards the new home market, where inventory is comparatively more abundant and prices more affordable. Moreover, a key knock-on effect of higher mortgage rates is that potential sellers are disincentivized from selling their home and trading into a higher mortgage rate. We do not expect the inventory situation to improve until this gap between prevailing mortgage rates and rates on existing mortgages narrows.

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