Sales of previously owned homes declined 2% in August from July to a seasonally adjusted annualized rate of 5.88 million units, according to the National Association of Realtors.
Sales were 1.5% lower than August 2020 for the first annual decline in 14 months. Sales, however, are still above pre-pandemic levels.
These numbers are a count of home closings and are based on contracts likely signed in June and July.
"The housing sector is clearly settling down," said Lawrence Yun, chief economist for the Realtors, who called last year's super surge "an anomaly."
The supply of homes for sale fell 1.5% month to month to 1.29 million at the end of August. Compared with August 2020, inventory is down 13%, but that comparison has been steadily shrinking for several months. At the current sales pace there was a 2.6-month supply.
"We do expect more inventory coming up, maybe with the end of the eviction moratorium," Yun said.
Tight supply pushed the median price of an existing home sold in August to $356,700, an increase of 14.9% from August of 2020. While the gain is very large, the annual comparisons are moderating as sales slow down.
The median is also being skewed by stronger activity on the higher end of the market. Sales of homes priced below $250,000 fell compared with a year ago, while sales of those priced above $1 million jumped 40%.
First-time buyers are clearly struggling with higher prices, falling to just a 29% share of all sales, the lowest since January 2019. Historically, first-time buyers usually make up 40% of buyers.
Yun said the market is becoming less competitive overall, with buyer traffic declining and the number of buyers waiving inspections, a competitive tactic, also falling. The number of offers on a typical home is now 3.8 compared with 4.5 a month ago.
Mortgage rates began falling in June from 3.25% down to a low of 2.78% on the popular 30-year fixed by the start of August, according to Mortgage News Daily. The drop would have helped first-time buyers most, as they tend to have the least wiggle room financially and are the most sensitive to interest rates, but clearly they are not helping enough.
Sales of newly built homes in July, which are based on signed contracts, not closings, and therefore would match up with the latest existing home sales numbers, rose slightly month to month but were down 27% from July 2020, according to the U.S. Census.
Builders have been raising prices to keep up with soaring costs for land, labor and materials. Recent earnings reports and guidance from several of the nation's largest builders note supply chain issues that are hampering production and leading to fewer new home closings.
Correction: Existing home sales were 1.5% lower than August 2020 for the first annual decline in 14 months. An earlier version mischaracterized the drop. First-time buyers fell to a 29% share of all sales. An earlier version misstated the percentage.