FXT Financial Focus (Asia-Pacific 09/11)US Home Sales Hit One-Year Low

Data from the National Association of Realtors showed that US existing home sales fell 2% in August to an annualized rate of 3.98 million units, the lowest in more than a year. Sales have rarely fallen below 4 million since autumn 2024, highlighting continued weakness as many potential buyers wait for borrowing costs to ease.

Employment and wage growth continue to support household purchasing power, but high home prices and mortgage rates are keeping many buyers out of the market. Homeowners with low-rate mortgages also have little incentive to move, as doing so would mean giving up cheaper financing. Less than a quarter of outstanding US mortgages currently carry rates above 6%, reinforcing the lock-in effect and limiting housing turnover.

The median existing home price rose 1.6% y/y to $429,100 in August, extending the upward trend seen since mid-2023. Price growth has slowed considerably from the double-digit increases during the pandemic, but affordability remains challenging. Income gains have not been enough to fully offset the combined impact of high prices and borrowing costs, contributing to the slow recovery in sales.

Meanwhile, existing home inventory increased to 1.62 million units in August, up 5.9% from a year earlier and the highest since November 2019. At the current sales pace, supply reached 4.9 months, also the highest in more than a decade. After years of tight supply, rising inventory is giving buyers more choice and reducing sellers pricing advantage.

Improving supply has also provided modest relief to housing affordability. The NAR Housing Affordability Index rose 3.5% from a year earlier, suggesting that conditions for a typical household to qualify for a mortgage on a median-priced home have improved. However, affordability remains historically weak, with the recent improvement largely reflecting stronger incomes and slower home-price growth rather than a fundamental easing of purchasing pressure.

Looking ahead, the US housing market may remain characterized by weak sales, rising inventory and slower price growth. If mortgage rates move closer to 7%, more first-time and move-up buyers could delay purchases, further postponing a recovery in transactions. At the same time, higher inventory could strengthen buyers negotiating power and force some sellers to lower asking prices if properties take longer to sell.

From FXTs perspective, US housing demand has not disappeared but is being held back by high financing costs. Employment and income continue to provide underlying support, while mortgage rates, home prices and switching costs constrain transactions. The key factors ahead will be whether inventory continues to rise and price growth cools further, as these trends will shape affordability and determine when the housing market can regain more stable momentum.