Existing-home sales inched up from July to August, despite remaining at lower levels than the same time last year, new projections from First American Data & Analytics show. The modest increase in First American's Existing-Home Sales Outlook Report for August marks the second consecutive month of increasing sales.
“Demographic trends indicate that we have plenty of would-be buyers on the sidelines waiting to jump in. Yet, both affordability and inventory levels remain historically low,” First American Deputy Chief Economist Odeta Kushi commented. “The recent decline in mortgage rates will entice a small group of buyers off the sidelines, but many more are waiting for the payment-to-paycheck calculation to pencil out.”
First American compiles its monthly Outlook Report using data from sales, demographic trends, house-buying power, and the prevailing financial and economic conditions. With mortgage rates continuing their descent, home sales are slowly but surely beginning to tick up.
However, affordability continues to be a challenge, and inventory remains at historic lows. “But, even if rates dip to six percent, fewer than 30 percent of renters could afford the median-priced home as of July. Moreover, the bulk of existing homeowners will still be rate locked-in," said Kushi.
Holding income constant, a 0.35 percentage point monthly decline in mortgage rates boosted house-buying power by $13,000 for the median-income household, First American found. The decline in rates resulted in just over a one percentage point increase in the share of renters who can afford the median-priced existing home nationally, from just over 23% to 24.5%.
As First American noted in its analysis, house-buying power is almost 4% greater than last month, and up 10% year over year, but remains 7% below the two-year, pre-pandemic average.
“If mortgage rates continue to ease throughout the remainder of 2024, it will bring additional progress, but not perfection, to the existing-home market,” Kushi continued. “While two months of increasing existing-home sales does not yet make a trend, it signals clear progress and there’s reason for optimism in the months ahead.”
