Home Prices Tick Up After Two Months of Decline

Following two months of year-over-year declines, home prices rose in August (0.7%) as the number of homes on the market decreased for the second month in a row, down 7.9% year-over-year, according to the Realtor.com August Monthly Housing Trends Report. Active inventory remained 47.8% below typical 2017 to 2019 levels, although an unseasonable increase in newly listed homes from July to August (+3.5%) this year provides more options for home shoppers as the fall buying season approaches.

“While the uptick in new listings is good news for home shoppers, inventory remains persistently low, even with record-high mortgage rates putting a damper on demand,” said Danielle Hale, Chief Economist for Realtor.com®. “The inventory crunch continues to put upward pressure on home prices, amplifying affordability concerns and shutting some potential buyers out of the market. However, we anticipate mortgage rates will gradually ease through the end of the year and, despite this month’s bump in home prices, we’ll be unlikely to see a new price peak this year.”

What it means for homebuyers, sellers, and the housing market
Although home sellers were less active in August compared to last year, the increase in newly listed homes for sale from July to August creates a nice boost for shoppers heading into fall, which is typically the best time to buy a home. Homeowners who have been on the fence about selling will likely find eager buyers looking for fresh listings.

“As fall buying activity heats up, the newly available homes for sale aren’t likely to remain on the market long, so sellers and hopeful homebuyers will need to be prepared to move quickly,” said Realtor.com Executive News Editor Clare Trapasso. “Home shoppers can save searches on Realtor.com to receive real-time alerts, receive mortgage pre-approvals, and pore over their budgets to determine what they can realistically afford with today’s higher mortgage rates.”

Affordability remains a significant concern. Although sales of new homes are on the rise, construction activity isn’t sufficiently robust to offset the inventory shortage and ease prices, which are up nearly 38% from August 2019 levels. Additionally, elevated mortgage rates have raised the monthly financing cost of the average home by about $417, up 21.7% from August 2022. This greatly exceeds both wage growth (4.4%) and inflation (3.2%).

Year over year home prices rise in August after two months of annual declines
In August, national home listing prices rose slightly compared to last year, ending a two-month streak of year-over-year price declines in June and July, buoyed by a scarce inventory of homes for sale across the country. Despite listing prices being slightly higher than in August of last year, the median list price is unlikely to surpass last year’s record peak of $449,000 in June 2022 as we head into the fall months and when home prices typically see a slight seasonal decline.