Stalled existing home sales dim hope for a fall rally
Meanwhile, mortgage rates ticked back up after several weeks of declines — but 30-year rates are still holding close to 11-month lows.
Key points:
- Existing home sales dropped 0.2% in August compared to July but were up 1.8% year-over-year.
- After several weeks of declines, mortgage rates increased slightly this week amid economic data that was stronger than forecasters expected.
- Mortgage applications are up — but mostly for homeowners who are seeking to take advantage of earlier rate drops and refinance.
It seems like it may take more than the recent drop in mortgage rates to ignite a fall housing market rebound.
Sales of existing homes dropped 0.2% in August compared to July, according to the National Association of Realtors. The seasonally adjusted annual rate of 4 million is on pace for another year-end 30-year low.
Meanwhile, prices continue to climb, with the median existing home sales price reaching $422,600 in August — up 2% from a year ago and the 26th consecutive month of year-over-year price increases.
Last month's drop in sales was not as drastic as forecasters expected, and existing home sales were actually up 1.8% year-over-year. However, the decline indicates that the market remains sluggish after several years of above average sales activity, according to Lisa Sturtevant, chief economist at Bright MLS.
"It does seem clear that without improved affordability, including a drop in both mortgage rates and potentially overall home prices, the movement back to the long-term average number of existing home sales will take longer," said Sturtevant, who expects this to happen in 2027.
Inventory supply starts to contract
Existing home inventory was up 11.7% year-over-year in August but down compared to July, NAR data shows. According to Nancy Vanden Houten, lead U.S. economist at Oxford Economics, there has been a sharp increase in the number of homeowners de-listing their properties because they aren't receiving price offers that they deem acceptable.
"Further reductions in supply may weigh on sales and put some renewed pressure on home prices," Vanden Houten said.
Affordability pressures persist
Housing affordability remains a nationwide challenge. In a Sept. 25 report, ATTOM estimated that 99% of U.S. counties have median priced houses and condos that are less affordable than historical averages.
"The drop in mortgage rates will help some buyers keep pace with the rising cost of homes," ATTOM CEO Rob Barber said in a news release. "But the more favorable loan rates could also enable prices to keep rising and further extend this two-and-a-half-year streak we're in of homes being less affordable to the typical resident of an area than they historically have been."
Economic data pushing up rates
Mortgage rates also ticked up this week, according to the latest Freddie Mac survey. The weekly average 30-year fixed-rate mortgage was 6.3% as of Sept. 25, up from 6.26% one week earlier. The weekly average rate was 6.08% one year ago.
Despite the Federal Reserve's September decision to cut short-term interest rates, other economic indicators — including falling jobless claims and data suggesting the U.S. economy grew faster than expected in the spring — are fueling concerns about inflation.
Mortgage activity holds strong
Even with the recent uptick, mortgage rates are still hovering around 11-month lows. This provides a boost to refinance activity, according to Samir Dedhia, CEO of One Real Mortgage.
"Looking ahead, markets are keeping a close eye on what comes next," Dedhia said. "The Fed has hinted at more rate cuts later in 2025 and into 2026, but those moves will depend entirely on how inflation, GDP, and the broader economy perform. If inflation stays sticky or economic growth surprises to the upside, we may see fewer rate cuts than markets are hoping for, which could keep mortgage rates elevated in the near term."
Mortgage applications were up 0.6% for the week ending on Sept. 19, according to the Mortgage Bankers Association (MBA). The Refinance Index was up 1% from the previous week and was 42% higher than a year ago, the MBA noted, while the Purchase Index dropped 1% for the week.
"While homebuyer demand typically tends to decrease during the fall, purchase application activity remains relatively strong right now, running 18 percent ahead of last year's pace," noted Mike Fratantoni, MBA's SVP and chief economist.
Pending sales drop
Though mortgage activity is up, pending sales dropped by about 1% from a year ago during the four weeks ending on Sept. 21, according to Redfin's Sept. 25 report.
High home prices and high mortgage rates both contributed to this first decline in three months, according to the report.