Sales of US homes have been steadily declining since August as supply remained constrained and mortgage rates remained high, the industry figures released on Thursday revealed.

Sales of existing homes have cooled in the world´s top economy as interest rates surged, lifting costs for new buyers and making it less attractive for homeowners to reenter the market after having locked in lower rates previously.

Existing home sales hit an annual rate of 4.04 million last month, seasonally adjusted, slipping 0.7 per cent from July according to the National Association of Realtors (NAR).

The figure was lower than analysts expected and 15.3 per cent below the same period a year ago.

“Sales are struggling, homebuyers are struggling,” said NAR chief economist Lawrence Yun.

He added in a statement that mortgage rate changes will have a big impact over the short term.

NAR data also showed that home prices continued climbing despite slower sales. The sales rate still hovers at the lowest levels since January.

“Supply needs to essentially double to moderate home price gains,” Yun said.

The median price for an existing US home in August rose to $407,100, 3.9% above the same month last year and the fourth highest on record according to Yun.

Meanwhile, the total housing inventory retreated from July´s levels as well.

‘Renewed decline’

Sales are down 17% in the third quarter so far, weakening from a 6.9% drop in the second quarter this year, said economist Rubeela Farooqi of High Frequency Economics.

There is likely to be a “renewed drop in sales” ahead, following the latest decline in mortgage applications, economists Ian Shepherdson and Kieran Clancy of Pantheon Macroeconomics said in a note.

The economists added that they “see no definitive bottom yet in mortgage applications.”

The popular 30-year fixed-rate mortgage averaged around 7.2% as of September 14, according to home loan finance company Freddie Mac.

A year ago, the level was 6% — substantially higher than the 2.9% figure in mid-September 2021.

Yun said it is “possible that mortgage rates may go up to eight per cent in the short run” before retreating next spring. If this happens, home sales could continue to slump.

“A real recovery cannot begin until mortgage rates fall substantially,” said the Pantheon report.