FILE PHOTO: Residential single family homes construction by KB Home are shown under construction in the community of Valley Center, California, U.S. June 3, 2021. REUTERS/Mike Blake/File Photo
WASHINGTON (Reuters) – U.S. home sales fell in August as supply remained tight and prices accelerated further, the latest indication that the loss of the momentum in the housing market persisted through the third quarter.
Existing home sales dropped 2.0% to a seasonally adjusted annual rate of 5.88 million units last month, the National Association of Realtors said on Wednesday. Sales fell in all four regions. Economists polled by Reuters had forecast sales would fall to a rate of 5.89 million units in August.
Home resales, which account for the bulk of U.S. home sales, fell 1.5% on a year-on-year basis.
The housing market boomed early in the COVID-19 pandemic amid an exodus from cities as people worked from home and took classes online, which fueled demand for bigger homes in the suburbs and other low-density areas. The surge, which was skewed towards the single-family housing market segment, far outpaced supply.
Expensive building materials as well as land and labor shortages have made it harder for builders to boost production. Government data on Tuesday showed single-family homebuilding fell for a second straight month in August.
Though the pandemic tailwind is fading, demand for housing remains strong thanks to near record low mortgage rates and rising wages from a tightening labor market.
The median existing house price increased 14.9% from a year ago to $356,700 in August. The pace of increase is, however, slowing and bidding wars are subsiding. Sales remain concentrated in the upper price end of the market.
There were 1.29 million previously owned homes on the market last month, down 13.4% from a year ago. At August’s sales pace, it would take 2.6 months to exhaust the current inventory, down from 3.0 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
Economists do not believe another housing bubble is developing as the acceleration is being mostly driven by a mismatch between supply and demand, rather than poor lending practices, which triggered the 2008 global financial crisis.
But higher prices are keeping some potential first-time buyers from the market. In August, properties typically remained on the market for 17 days, unchanged from July. Eighty-seven percent of the homes sold last month were on the market for less than a month.
First-time buyers accounted for 29% of sales, the lowest since January 2019, down from 30% in July and 33% a year ago.