Existing Home Sales Decline 2.0% in August Amid Affordability Concerns

According to Bryce Gill, Economist, Brian S. Wesbury, Chief Economist, and Robert Stein, CFA, Deputy Chief Economist at First Trust Portfolios, existing home sales in the US declined by 2.0% in August to an annual rate of 3.980 million, aligning with consensus forecasts. Sales were also down 1.2% compared to a year ago. The report indicates that sales decreased in the Northeast, Midwest, and South regions, while remaining unchanged in the West, with both single-family homes and condos/co-ops contributing to the overall drop.

First Trust's economists highlight that the median price of an existing home fell to $429,100 in August (not seasonally adjusted), though it was up 1.6% year-over-year. The commentary suggests that the recent surge in mortgage rates has deterred potential buyers, causing sales to remain at their slowest pace in over a year. Wesbury and his colleagues note that existing home sales activity has been 'stuck in low gear' since the end of the COVID pandemic, consistently hovering around a 4.000 million annual pace, which they observe is comparable to the aftermath of the Great Financial Crisis and significantly below pre-COVID levels.

The economists at First Trust attribute the primary challenge to affordability, which they say has worsened following the conflict with Iran, leading to higher energy costs and impacting short-term inflation. This, they explain, has resulted in a rapid increase in 30-year mortgage rates, which have risen 70 basis points since February to approximately 6.8%. They also suggest that the Federal Reserve is unlikely to offer assistance to buyers, given the strength of the US labor market and persistent inflation, which puts rate hikes back on the table.

Despite these challenges, First Trust points to some positive developments for buyers. The inventory of existing homes has been improving, reaching its highest level since the pandemic, though still below pre-COVID figures. The months’ supply of homes increased to 4.9 in August, nearing the 5.0 benchmark that the National Association of Realtors considers a normal market. Furthermore, while the median home price is near a record high, its 1.6% annual increase is being outpaced by aggregate wage growth since early-2025, which First Trust believes is gradually improving affordability. The report concludes that, despite continued crosscurrents, the underlying fundamentals for a modest improvement in home sales are beginning to emerge.

Key terms

1. Existing Home Sales: Refers to the sale of previously owned homes, not newly constructed ones, measured at an annual rate.

2. Median Price: The middle point in a series of prices, meaning half of the homes sold for more and half sold for less than this amount.

3. Mortgage Lock-in: A phenomenon where homeowners are reluctant to sell their homes because they have a mortgage with a significantly lower interest rate than currently available rates.

Source: Bryce Gill, Economist; Brian S. Wesbury, Chief Economist; Robert Stein, CFA, Deputy Chief Economist, First Trust Portfolios — Data Watch. Read the original at ftportfolios.com.