US existing home sales fall less than expected in August

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U.S. existing home sales fell for the seventh straight month in August as affordability deteriorated further amid rising mortgage rates and stubbornly high prices, though the pace decrease moderated compared to previous months.

Existing home sales fell 0.4% to a seasonally adjusted annual rate of 4.80 million units last month, the National Association of Realtors said Wednesday. Discounting the drop during the spring of 2020 when the economy was reeling from the first wave of COVID-19, this was the lowest sales level since November 2015.

Economists polled by Reuters had forecast sales would decline at a rate of 4.70 million units.

Existing home sales, which account for the bulk of home sales in the country, were down 19.9% ​​year-on-year.

The aggressive tightening of monetary policy by the Federal Reserve, marked by sharp increases in interest rates, has significantly weakened the housing market. By contrast, other sectors of the economy, such as the labor market, have shown great resilience despite the Fed’s attempts to cool demand.

Data this week showed confidence among single-family home builders eroded for the ninth consecutive month in September, while permits for future home building fell to the lowest level since June 2020 in August.

Markets expect the Fed to raise its policy rate by 75 basis points later on Wednesday for the third time in a row. Since March, the central bank has raised that rate from near zero to its current range of 2.25% to 2.50%.

Mortgage rates, which move along with Treasury yields, have soared even higher. The 30-year fixed mortgage rate averaged 6.02% last week, down from 5.89% the previous week, topping 6% for the first time since November 2008, according to data from mortgage finance agency Freddie Mac.

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Although house price growth has slowed as demand weakens, tight supply is keeping prices high. The median existing home price increased 7.7% from a year earlier to $389,500 in August. There were 1.28 million second-hand homes on the market, unchanged from a year ago.

At the pace of sales in August, it would take 3.2 months to deplete the current stock of existing homes, up from 2.6 months last year. A supply of four to seven months is considered a healthy balance between supply and demand.

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