Existing home sales in the U.S. in August hit a one-year low, while the absorption cycle reached a ten-year high.

The U.S. existing home sales market remains under pressure. Latest data show that, dragged down by elevated mortgage rates, August existing home sales fell below the key recent threshold, with buyers generally delaying entry into the market and a clear catalyst for a housing recovery still lacking.

Data released Thursday by the National Association of Realtors (NAR) showed that in August, the number of contracts signed for existing home sales fell 2% from the previous month, exceeding expectations of 1.6%. The annualized rate dropped to 3.98 million homes, the lowest level in over a year, and one of only two times since fall 2024 that the figure has dipped below 4 million.

Meanwhile, the median price of existing homes in August rose 1.6% year-on-year to $429,100, continuing the continuous annual increase trend seen since mid-2023.

NAR Chief Economist Lawrence Yun stated in a release, "Mortgage rates move inversely with home sales. It's no surprise that purchasing activity has eased moderately in a high-rate environment." He also warned that mortgage rates could soon hit 7%.

Current mortgage rates have risen to the highest level in over a year, creating a double drag on potential buyers.

On the one hand, monthly payment pressure directly weakens purchase intent; on the other, homeowners who refinanced at less than half the current rates a few years ago are facing the dilemma of "selling means losing a low-rate mortgage," and are inclined to stay put.

According to a recent housing market report by Apollo Global Management, less than one-quarter of all outstanding mortgages nationwide have rates above 6%. This means the vast majority of homeowners still enjoy substantially lower borrowing costs compared to the market, providing little motivation to move.

Nonetheless, Lawrence Yun said in a conference call with reporters that buyer demand has not "completely collapsed." Improvements in employment and wage growth have to some extent supported underlying demand in the market.

While demand remains weak, there are positive signs on the supply side of the market.

In August, the inventory of existing homes for sale increased 5.9% year-on-year to 1.62 million units, the highest level since November 2019. At the current pace of sales, existing inventory equates to 4.9 months of supply, the highest in over a decade.

NAR’s Housing Affordability Index, which measures whether a typical family qualifies for a mortgage on a median-priced home, rose 3.5% year-on-year, indicating marginal improvement. Still, the overall index remains at historic lows, offering limited substantial support to the market.

Regionally, the Southern U.S., the nation's largest existing home sales market, saw sales fall 1.6% month-on-month in August, with the annualized rate dropping to 1.84 million units, the weakest in a year. Sales also declined in the Midwest and Northeast, while the West remained flat.

First-time buyers made up 30% of all existing home sales in August, up slightly from July’s 29%, with participation from this group remaining relatively stable in the current high-rate environment.