U.S. existing home sales fell more than expected in August as home prices remained high despite continued improving supply.
The National Association of Realtors said Thursday that home sales last month fell 2.5% from a year earlier to a seasonally adjusted 3.86 million.
Economists polled by Reuters had expected home resales to fall to 3.9 million.
Home resales, which account for the majority of U.S. home sales, fell 4.2% in August from a year earlier.
The median existing home price rose 3.1% from a year ago to $416,700, the highest on record for August.
Home prices rose in all four regions.
The Federal Reserve cut interest rates by 50 basis points on Wednesday, its first cut in borrowing costs since 2020. The move could further lower mortgage rates, which have fallen to their lowest levels in 18 months.
Lower mortgage rates could encourage more homeowners to put their homes on the market, increasing supply.
The majority of homeowners are paying mortgage rates below 4 percent, and so-called “rate lock-ins” have caused the supply of existing homes to dry up on the market.
But lower borrowing costs could stimulate demand to outstrip supply, keeping home prices high.
“The real problem with housing is that there has been a housing shortage and there will continue to be a housing shortage,” Fed Chairman Jerome Powell told reporters on Wednesday, adding, “This is not a problem that the Fed can actually solve, but if we normalize interest rates, the housing market will normalize.”
Housing inventory rose 0.7% to 1.35 million units last month. Supply increased 22.7% from a year ago.
“Home sales continued to disappoint in August, but the powerful combination of recent declines in mortgage rates and rising inventory should create an environment for sales to pick up in the coming months,” said Lawrence Yun, chief economist at the National Association of Realtors.
At August's sales pace, it would take 4.2 months to use up the current inventory of existing homes, longer than the 3.3 months a year ago. A four- to seven-month supply is considered a healthy balance between supply and demand.
Properties stayed on the market for 26 days in August compared to 20 days a year ago.
First-time homebuyers accounted for 26% of sales, matching the record low last recorded in November 2021 and down from 29% a year earlier.
That rate remains below the 40% that economists and real estate agents say is needed to jump-start the housing market.
All-cash sales accounted for 26% of transactions, down from 27% a year ago.
Distressed sales, including foreclosures, accounted for just 1% of total transactions, unchanged from last year.
