The American Midwest saw home sales in August bucking the trend of declines across the rest of the country as high mortgage rates and low supply discourage buyers from entering the housing market.
The Midwest saw home sales jump by a percent to nearly a million houses from July. However, compared to a year ago, this was more than 16 percent compared to a year ago, according to data released on Thursday from the National Association of Realtors (NAR). Overall, sales declined by 0.7 percent in August and plunged more than 15 percent to about 4 million from a year ago.
Analysts, however, pointed out that home sales are starting to stabilize.
“Home sales have been stable for several months, neither rising nor falling in any meaningful way,” Lawrence Yun, NAR’s chief economist, said in a statement.
The housing market has been under significant pressure over the last year following the Federal Reserve’s moves to hike interest rates in its battle against high inflation contributing to a spike in mortgage rates making it expensive for prospective buyers to acquire homes.
First-time buyers have been slow to enter the market. In November, NAR found that the share of first-time homeowners in 2022 dropped to 26 percent from 34 percent the previous year. In August, sales to this segment of the sector were down to 29 percent from 30 percent the last month.
“Mortgage rate changes will have a big impact over the short run, while job gains will have a steady, positive impact over the long run,” Yun said.
The 30-year fixed rate mortgage has topped 7 percent over September, a two-decade high. Meanwhile, prices have spiked even as housing inventory has declined.
Earlier this week, data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) showed that new homes construction sharply declined adding to a lack of enough houses for sale and contributing to high prices.
The number of houses available for sale was down 14 percent from a year ago, NAR said, echoing numbers from the Census Bureau and HUD. The cost of a new house was a little over $400,000 a jump of nearly 4 percent from 2022.
“Home prices continue to march higher despite lower home sales,” Yun said. “Supply needs to essentially double to moderate home price gains.”
There was a slight increase in all cash sales, a segment that represents mostly investors and second home buyers, and they made up about 27 percent of sales in August an increase of 1 percent from the previous month and up from 24 percent from a year ago.
While every region bar the Midwest saw a decline in sales, the South was weathering the storm better than the rest of the country.
“The South had a lighter decline in sales from a year ago due to greater regional job growth since coming out of the pandemic lockdown,” Yun said.