The turbocharged housing market slowed in August as near record asking prices are giving buyers pause, easing some of the frenzy that gripped the market only a few months ago.
August existing-home sales posted a 2% decline from July, the biggest monthly decline since April, the National Association of Realtors said Wednesday. Sales last month also slid 1.5% from a year earlier, the first year-over-year decrease since June 2020.
Home sales surged in the second half of last year and first half of 2021 after pandemic-related lockdowns pushed the normally busy spring selling season into the fall and winter. As lockdowns lifted, buyers raced to find more space for their families to work and attend school from home, and wealthy households invested in vacation properties.
Now, the house-buying frenzy is showing signs of abating. Families have resettled and are sending their children back to school. More workers are starting to return to their offices.
The housing market remains hot. Low mortgage rates continue to spur robust demand, and the number of houses for sale is well below normal for this time of year. The pace of home sales exceeds what it was before the Covid-19 pandemic.WHAT’S NEWSHot Housing Market Shows Signs of Cooling00:001xSUBSCRIBE
Yet the period of extreme competition among house buyers has pushed prices sharply higher. Some prospective buyers can no longer afford to buy, and others have taken a break from house hunting after losing out on multiple offers, real-estate agents say.
“I’ve had a couple of buyers that have said, ‘We’re just going to sit this market out right now, because we’re tired,’” said Latrice McFadden, a real-estate broker in Durham, N.C. “If you’ve submitted five, six, seven offers, 10 offers, whatever, and you get outbid, then you can get buyer fatigue.”
In recent months, home sales on a seasonally adjusted annual basis have hovered between about 5.8 million and 6 million, according to NAR. That is a high figure on a historic basis. But it is a noticeable pullback from the recent peak of 6.73 million in October, which was the highest level since 2006.
“Clearly the home sales are settling down,” said Lawrence Yun, NAR’s chief economist. “The high home prices are squeezing away the first-time buyers.”
Many homes are selling above listing price and receiving multiple offers. The typical home sold in August was on the market for 17 days, unchanged from the prior month, NAR said.
But other indicators showed a market cooling off a touch. The average number of offers per home declined in August, NAR said. The share of buyers who waived inspection and appraisal contingencies in their offers—a common tactic for winning bidding wars—declined as well, suggesting buyers felt they were regaining some advantage.
The share of home listings with a price cut rose for the fourth straight month, to 12.3% in August, according to Zillow Group Inc. Month-over-month home-price growth slowed in August compared with July in 43 of the country’s 50 biggest metro areas, Zillow said.
And while home prices remain near record highs, the pace of price growth is also slowing. The median existing-home price rose 14.9% in August from a year earlier, NAR said, to $356,700. That is down from a nearly 18% increase the prior month.
“As we start to see the prices get so extreme, we hit a bit of an affordability ceiling for more and more households,” said Skylar Olsen, principal economist at mortgage-finance startup Tomo Networks. “They just cannot compete against the prices that they see.”
The market is most competitive at lower price points, where buyers with limited cash can be outbid by investors or cash buyers. About 22% of August existing-home sales were purchased in cash, up from 18% a year earlier, NAR said.
The share of first-time buyers in the market, meanwhile, fell to 29%, the lowest level since January 2019.
Christine and Chris Levi moved from the Denver area to Atlanta in March for warmer weather and a lower cost of living. They bought their first house, a three-bedroom in Douglasville, Ga., in August for $295,000.
They knew the housing market was competitive. But “we didn’t want to wait and hope that things would calm down, because it hasn’t seemed to in so long,” said Ms. Levi, who works remotely for a software company. “For what we have here, in Colorado it would have been at least $700,000 or more.”
The number of homes for sale fell 1.5% in August from July. Mr. Yu said the inventory could rise later this year as home builders complete new homes.
Building activity has increased due to the strong demand, but home builders have sold more homes than they can build and are now limiting sales as they catch up. Housing starts, a measure of U.S. home-building, rose 3.9% in August from July due to an increase in multifamily starts, the Commerce Department said this week. Residential permits, which can be a bellwether for future home construction, rose 6%.
News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from NAR.
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