US Home Sales Drop to 3.98 Million as Mortgage Rates Hit 14-Month High

Existing home sales in the United States fell to a seasonally adjusted annual rate of 3.98 million units in August. This marks the third consecutive monthly decline in transaction volume. The drop to the slowest pace in more than a year reflects sustained pressure on buyer affordability. The National Association of Realtors reported the data on Thursday. Sales were down 2% from July and 1.2% compared to the same month last year. Economists had projected a pace just under 4 million units. The final figure came in slightly below those expectations.

The average 30-year fixed mortgage rate rose to 6.76% in the week ending August 22. This is the third straight week of increases. The rate now sits at its highest level in over 14 months. Freddie Mac reported the benchmark rate climbed from 6.71% the previous week. A year ago, the average rate stood at 6.35%. Higher borrowing costs continue to suppress demand for previously occupied homes. Buyers face a dual challenge of elevated prices and increased financing costs.

Inflation data shows persistent price pressure

The Labor Department reported that the consumer price index rose 3.4% year over year in August. This matches the rate observed in July. On a monthly basis, inflation accelerated to 0.4%. The previous month saw a 0.1% increase. Gas prices spiked following renewed conflict in the Middle East. This energy cost shock contributed to the broader price increases. Inflation remains elevated more than five years after the initial post-pandemic surge.

Wholesale prices also climbed in August. The producer price index rose 5.4% from a year earlier. This is up from 4.8% in July. Monthly wholesale prices increased by 0.4% after a 0.1% gain in July. Diesel prices hit a record national average of $6.05 per gallon. This is up from $5.85 the week before. Diesel is a key input for freight and delivery networks. Businesses are passing these higher costs to consumers through added fees.

Energy costs drive broader economic strain

US oil prices topped $100 a barrel on Thursday. This follows renewed fighting in the Middle East. The trade war with Canada has also intensified. These factors suggest tariffs may continue to push up costs. Consumers report that trips to grocery stores and gas stations are more expensive than last year. These rising costs impact household and business decision-making. The economic environment remains challenging for voters ahead of midterm elections.

According to GN auto markets/housing: housing prices, the housing sector is under specific stress. The combination of high rates and sales declines indicates a cooling market. This trend contrasts with the broader inflation picture where energy costs dominate. The Federal Reserve faces a difficult balance in managing these conflicting signals. Persistent inflation presents a major challenge for policymakers. The data underscores the current affordability crisis in the US.