August data reveals continued pressure on the US existing home sales market. Elevated mortgage rates pushed sales volume below a key threshold, prompting many prospective buyers to delay their purchases, while the sector still awaits a clear catalyst for recovery.

Figures released Thursday by the National Association of Realtors (NAR) show that pending existing home sales fell 2% month-over-month in August. This decline exceeded the 1.6% market expectation, bringing the seasonally adjusted annualized pace to 3.98 million units—the weakest reading in over a year and only the second time since autumn 2024 that sales have dipped below the 4 million mark.

Meanwhile, the median existing-home price climbed 1.6% year-over-year in August to $429,100, extending a streak of annual price increases that began in mid-2023.

NAR's chief economist, Lawrence Yun, noted in a statement that mortgage rates and home sales share an inverse relationship, making the moderate pullback in buying activity under high-rate conditions an unsurprising outcome. He also cautioned that mortgage rates could soon approach the 7% threshold.

High financing costs and the lock-in effect continue to temper demand. With mortgage rates sitting at more than one-year highs, potential buyers face a dual drag on their decisions.

On one hand, higher monthly payments directly dampen purchasing appetite. On the other, homeowners who refinanced years ago at rates less than half of current levels are reluctant to list their properties, as selling would mean forfeiting their ultra-low-rate mortgages. Recent analysis from Apollo Global Management indicates that fewer than one-quarter of outstanding mortgages nationwide carry rates above 6%, meaning the vast majority of homeowners still benefit from financing costs well below market rates, leaving little incentive to trade up.

Yet, during a press call, Lawrence Yun stated that buyer demand has not "completely collapsed." Improving employment conditions and wage growth are providing some support for underlying demand at the lower end of the market.

On the supply side, there are signs of improvement even as demand softens. Inventory of existing homes for sale rose 5.9% year-over-year in August to 1.62 million units, the highest level since November 2019. At the current sales pace, that inventory represents a 4.9-month supply, the most elevated reading in over a decade.

The NAR's housing affordability index, which measures whether a typical family qualifies for a mortgage on a median-priced home, improved 3.5% year-over-year, suggesting marginal gains in affordability. However, the gauge remains near historical lows, limiting its potential to meaningfully spur market activity.

Regionally, the South—the nation's largest existing-home sales market—saw August sales fall 1.6% month-over-month to an annualized pace of 1.84 million units, marking its weakest performance in nearly a year. The Midwest and Northeast also posted declines, while the West held steady.

First-time buyers accounted for 30% of all existing home sales in August, slightly up from 29% in July. Their participation has remained relatively stable despite the high-rate environment.