Existing home sales in the U.S. edged down slightly in August, reflecting the ongoing tug-of-war between buyer demand and affordability constraints. According to the National Association of Realtors, sales dipped 0.2% month-over-month to a seasonally adjusted annual rate of 4 million units, though they managed a modest 1.8% year-over-year increase. This stagnation isn’t happening in a vacuum—it’s the result of persistently high mortgage rates, which despite recent declines remain well above pandemic-era lows, and home prices that continue climbing. For prospective buyers, this means the dream of homeownership feels increasingly out of reach, especially for those grappling with student debt, rising rents, and inflation in other areas of their budget. Understanding these dynamics is key to navigating today’s market, whether you’re a first-time buyer, an investor, or simply keeping an eye on housing trends. Let’s dive into what’s driving these numbers and what it could mean for you.
The affordability crisis has been years in the making, but August’s data underscores just how entrenched these challenges have become. Even as mortgage rates have retreated from their 2023 peaks, hovering around 6.26% for a 30-year fixed loan, they’re still nearly double what they were in 2020–2021. Combine that with median home prices pushing past $422,600—up 2% year-over-year and a staggering 52% higher than pre-pandemic levels—and it’s no wonder many buyers are hesitating. For context, a household earning the median income would need to spend over 30% of their monthly earnings on a mortgage payment for a median-priced home, crossing into what experts define as ‘cost-burdened’ territory. This squeeze is particularly acute in high-cost regions like the West and Northeast, where inventory shortages exacerbate the problem. Practical insight: If you’re considering buying, run the numbers not just on today’s rates but on what you could afford if rates dip further—it might be worth waiting if your timeline allows.
Lawrence Yun, NAR’s chief economist, pointed to declining mortgage rates and improving inventory as reasons for optimism in the coming months, and there’s merit to that view. The Federal Reserve’s recent rate cut—the first since December—signals a shift in monetary policy that could translate into lower borrowing costs for home loans. Markets are pricing in additional cuts through the end of the year, which would likely pull mortgage rates down further, making homes more accessible to a broader pool of buyers. However, it’s important to remember that mortgage rates don’t move in lockstep with the Fed’s actions; they’re influenced by broader economic conditions, investor sentiment, and inflation expectations. For now, the trend is favorable, but buyers should stay agile and keep an eye on weekly rate movements from lenders like Freddie Mac. Locking in a rate during a dip could save thousands over the life of a loan.
Regionally, the story is mixed, highlighting how real estate remains intensely local. Sales rose in the Midwest and West month-over-month, thanks in part to better affordability in heartland states like Ohio and Illinois, where median prices are lower and inventory is more balanced. Meanwhile, the Northeast and South saw declines, reflecting higher costs and supply constraints. This divergence offers a strategic lesson: If you’re flexible on location, expanding your search to more affordable regions could yield better opportunities. For example, markets in the Midwest often feature newer inventory, stronger job growth in certain sectors, and lower property taxes, all of which can improve long-term affordability. Investors are already taking note—they accounted for 21% of purchases in August, up from 20% in July, often targeting these value-oriented markets.
Inventory levels dipped slightly in August to 1.53 million units, which at the current sales pace translates to a 4.6-month supply—unchanged from July and still below the 6-month benchmark that indicates a balanced market. This shortage continues to put upward pressure on prices, creating a frustrating cycle for buyers: limited options mean more competition, which drives prices higher, which in turn makes it harder to save for a down payment. First-time buyers, who made up 28% of sales in August (unchanged from July but up from 26% a year ago), are particularly affected, as they often have fewer resources to compete with all-cash offers or investors. If you’re in this group, consider working with an agent who has experience in competitive markets and can help you craft compelling offers, such as including escalation clauses or flexible closing timelines.
The share of all-cash transactions fell to 28% in August, down from 31% in July, which might seem like good news for financed buyers. However, this still means nearly one-third of homes are selling without mortgages, often to investors or downsizing boomers who have equity from previous sales. This trend reinforces the importance of having your financing in order before you start house hunting. Get pre-approved with a reputable lender, shore up your credit score, and aim for a down payment of at least 10–20% to make your offer more competitive. If you can’t compete with cash, consider other concessions, like offering to cover closing costs or waiving certain contingencies (though cautiously—always protect yourself with inspections).
Looking back over the past two years, the sales pace has averaged around 4 million units per month—a level weaker than even during the 2007–2009 housing crisis. This isn’t because of a lack of demand; rather, it’s a supply-driven slump. Builders haven’t kept up with household formation since the Great Recession, and the pandemic exacerbated imbalances as remote work fueled migration and demand for larger homes. Until construction accelerates or demographic shifts ease pressure, this low-supply environment is likely to persist. For buyers, this means patience and persistence are essential. Don’t get discouraged if you lose out on multiple offers; the right property will come along, especially as more sellers list homes in the spring and fall markets.
Investors are playing an outsized role in today’s market, and their activity rose in August to 21% of transactions. Many are targeting single-family homes to rent out, capitalizing on strong demand from households priced out of buying. While this adds competition for owner-occupants, it also creates opportunities. For example, some investors may be willing to sell properties quickly if they need liquidity, potentially at a discount. If you’re open to a fixer-upper or a home with tenant occupancy, you might find deals others overlook. Just be sure to work with an agent who understands investment sales and can help you navigate lease agreements or repair negotiations.
The Federal Reserve’s rate cuts are a welcome development, but their impact on mortgage rates will unfold gradually. Historically, mortgage rates tend to decline during easing cycles, but they can be volatile along the way. For example, if inflation proves stickier than expected, the Fed might pause cuts, keeping rates higher for longer. Buyers should use tools like rate lock agreements to secure dips, but also consider adjustable-rate mortgages (ARMs) if they plan to sell or refinance within 5–7 years. ARMs often offer lower initial rates, providing short-term relief while waiting for fixed rates to fall. Just be aware of the risks—if rates rise at adjustment time, your payment could increase.
For sellers, the current environment offers mixed signals. Prices are up year-over-year for the 26th straight month, but sales are sluggish, indicating that only well-priced, move-in-ready homes are attracting attention. If you’re thinking of listing, focus on presentation: declutter, stage key rooms, and highlight energy-efficient features that appeal to cost-conscious buyers. Pricing strategically is crucial—overpricing can lead to extended days on market and eventual price cuts. Work with an agent to analyze comps and set a competitive price from the start. Consider offering incentives like rate buydowns to help buyers qualify for higher loans.
First-time buyers face the steepest hurdles, but there are programs designed to help. FHA loans, for instance, allow down payments as low as 3.5%, and many states offer down payment assistance grants or tax credits. If you’re struggling to save, look into these resources early in your process. Also, consider expanding your criteria—maybe a condo, townhouse, or slightly farther commute could fit your budget better. Remember, your first home doesn’t have to be your forever home; building equity now can set you up for a trade-up later. Use online calculators to model different scenarios based on rate changes and price growth assumptions.
Actionable advice: Stay informed and proactive. Monitor mortgage rate trends weekly using sources like Freddie Mac’s survey, and build relationships with a trusted lender and real estate agent. If rates drop significantly, be ready to move quickly—have your documents organized and your wish list prioritized. For sellers, price realistically and enhance your home’s appeal to stand out. For buyers, explore all financing options, including ARMs and down payment assistance, and consider targeting less competitive markets or off-season listings. Above all, remember that real estate is a long-term investment; today’s challenges won’t last forever, and strategic decisions now can pay off for years to come.
