US home sales weaken to slowest pace in more than a year as mortgage rates, home prices climb

U.S. home sales slowed sharply in August to their slowest annual pace in more than a year, as rising mortgage rates and home prices deterred buyers, according to the National Association of Realtors. Existing home sales dropped 2% from July to 3.98 million units, marking the third consecutive monthly decline. This activity is just below the 4 million units pace economists anticipated, according to FactSet.

Lawrence Yun, chief economist at NAR, noted that mortgage rates have been steadily increasing since February. Home prices, however, continued to climb, with the U.S. median sales price reaching $429,100 in August, an all-time high for the month since 1999. Despite the slowdown, existing U.S. home sales are 1.6% higher through the first eight months of the year compared to the same period last year.

The housing market's sluggishness is primarily attributed to higher borrowing costs, as mortgage rates have risen due to expectations of higher inflation from surging oil prices. The average 30-year mortgage rate hit 6.71% last week, its highest level in over a year. Yun predicted rates could climb to 7% as the 10-year Treasury yield continues to increase.