August Housing Sales Hit 15-Month Low as Rates Spike and Prices Diverge

Key points

• Existing home sales fell 2% month-over-month in August, marking the slowest pace since June 2025.
• The 30-year fixed mortgage rate reached its highest level in over a year, directly suppressing buyer activity.
• The median existing home price rose 1.6% year-over-year to a record $429,100, despite the sales decline.
• Housing inventory reached 1.62 million units, representing a 4.9-month supply, the highest in over a decade.
• Sales of homes priced above $1 million increased 3.9% year-over-year, while homes under $250,000 dropped 10%.

Background

This August slowdown follows a trend of elevated mortgage rates, which hit 6.87% in late September, the highest in over a year. Earlier forecasts from Capital Economics predicted a prolonged housing slump through 2028, with rates remaining above 6% for at least two more years. July pending sales had already hit record lows in the West, signaling the current cooling trend.

How outlets are covering it

CNBC and Kitco both attribute the sales drop to high mortgage rates, citing NAR economist Lawrence Yun. However, CNBC emphasizes the record-high median price and the divergence between high-end and low-end sales, while Kitco notes that gold prices largely ignored the housing data, suggesting broader market stability. USA Today highlights a different metric, noting that median listing prices per square foot fell 1.8% nationwide, with the steepest drops in pandemic-era boomtowns like Austin and Tampa, contrasting with the NAR's report of rising median sales prices.

Why it matters

The divergence between falling sales and rising prices, alongside record inventory, signals a market in transition. High rates are suppressing volume, but limited affordable inventory and strong high-end demand are keeping prices elevated. This dynamic suggests continued pressure on first-time buyers and investors, while cash buyers and luxury segment buyers maintain leverage.

What to watch

Analysts expect mortgage rates to remain elevated, potentially keeping home sales subdued through 2028. Sellers in overpriced markets may continue to lower asking prices to attract buyers, while the high inventory levels may eventually lead to broader price corrections if rates do not fall.