Sales of existing homes in August fell 1% from July and 3.1% year over year to a seasonally adjusted annual rate of 4,042,369, according to a new report from Redfin. Those figures mark the slowest pace of existing-home sales in Redfin's records dating back to 2012, except May 2020, when the pandemic brought the housing market to a standstill.
Redfin's report also showed that pending home sales fell to the lowest level on record aside from April 2020. Pending sales fell 1.9% month over month in August on a seasonally adjusted basis and dropped 2.4% year over year.
Despite mortgage rates declining since spring, buyers have been reluctant to respond due to elevated home prices and the pressure to come up with larger down payments; the median sale price rose 3% year over year in August to $433,101. While that’s the smallest increase in almost a year, prices were still only 2.1% below their all-time high of $442,344 in June.
Fannie Mae's September 2024 commentary from its Economic and Strategic Research (ESR) Group echoed Redfin's sentiments, suggesting that even though supply and rates have improved, existing-home sales are not expected to pick up meaningfully through the remainder of 2024, with the annual pace now forecast to be the slowest since 1995.
The Group now expects 2024 total home sales to be 4.7 million (previously 4.8 million), down 0.3% from their 2023 total. The Group expects the 30-year fixed mortgage rate to average 6.6% in 2024 and to average 5.9% in 2025.
"We forecast sales to then pick up by 9.8% in 2025 to a pace of 5.1 million units; with the majority of that increase coming in the second half of 2025 if mortgage rates decline sufficiently to end 2025 at 5.7%, as we currently project," the commentary read.
Per the ESR Group, existing-home sales have not grown despite a nearly 20% increase in homes available for sale from year-ago levels, in part due to geographic variations. The Group said much of the increase in for-sale inventories has occurred in the Sun Belt and Mountain West regions, areas that also experienced some of the strongest home price growth in recent years, as well as robust new home construction.
The ESR Group's economic growth outlook was mostly unchanged this month, as incoming data has been largely consistent with expectations. The ESR Group notes that the economy is likely shifting into a slower growth path, and as inflation moves closer to the 2% target, the Federal Reserve is poised to move monetary policy toward a more neutral stance.
"...home sales activity, particularly on the existing side, remains near what we consider to be the floor of basic demographic and household mortgage demand," said Fannie Mae Senior Vice President and Chief Economist Doug Duncan. "We think it's likely that many would-be borrowers are waiting for affordability to improve even further, and that some may be anticipating additional declines in mortgage rates given expectations that the Fed will lower the federal funds target rate...we expect affordability to remain the primary constraint on housing activity for the foreseeable future, and we now think full-year 2024 will produce the fewest existing home sales since 1995."
The Group also shared its predictions for single-family mortgage originations. The Group expects 2024 purchase origination volume to be $1.3 trillion, a downward revision of $20 billion from the prior forecast. The Group reasoned that the revision was driven by a weaker expectation for existing-home sales. In 2025, the Group expects purchase volumes to grow by 15% year over year to $1.5 trillion.
As for refinances, the ESR Group now expects 2024 volume to be $375 billion and 2025 volumes to come in at $649 billion. Both are upward revisions from last month's forecasts.
