After climbing 6 percent in July, home sales fell into a trough in August — declining 0.6 percent year over year, according to Zillow’s latest market report.
Elevated mortgage rates have complicated the math for homebuyers, as the typical home value rose 1.3 percent year over year to $369,678. That — matched with an average 30-year mortgage rate of 6.5 percent — has pushed the typical monthly mortgage payment up 2 percent to $1,897. The rental market isn’t any better, with the typical U.S. rent increasing 2.5 percent year over year to $1,948.
Price pressure in the for-sale and rental markets has placed would-be homebuyers between a rock and a hard place, with neither option offering the affordability households are seeking.
Homesellers are attempting to draw buyers to the shore via price cuts, with the share of listings with a price cut in August rising 0.5 percentage points year over year to 26.3 percent. However, 29.6 percent sold above the list price in August — signaling a continuing competitiveness in the market despite active inventory (3 percent) and new for-sale listings (2.4 percent) both rising on an annual basis.
Mischa Fisher
Zillow Chief Economist Mischa Fisher said sales will likely continue to ebb in the fall, as buyers lean toward renting.
“The for-sale housing market took a step back in August, and mortgage rates above 6.5 percent are the primary culprit,” he said in the report. “The combination of weak sales and even weaker pending sales points to a soft close to 2026.”
Mortgage rates hit a 13-month high of 6.71 percent during the week ending Sept. 3, as a global bond sell-off tied to renewed fighting in the Middle East pushed borrowing costs higher across the board, a previous Inman article explained.
Rates could reach even higher levels in the coming weeks, as the Federal Reserve is expected to hike rates at the next Federal Open Market Committee (FOMC) meeting on Sept. 26.
At the July meeting, the Fed held the federal funds rate (the short-term rate) steady at 3.5 to 3.75 percent. Currently, the CME FedWatch has put the probability of a hike at 62.4 percent — a 28 percentage point increase — nearly two weeks ago. Meanwhile, the probability of no change has sunk from 65.5 percent to 37.6 percent.
The federal funds rate impacts how banks and financial institutions set their rates, including mortgage rates. However, a change in the federal funds rate does not guarantee mortgage rates will move in tandem.
Although the hope of a rebound is no longer on the horizon, Fisher said steady inventory levels will be enough to keep motivated buyers afloat.
“There are more homes for sale than a year ago, which is good news for buyers who are ready to move, but until rates ease, many households will likely stay on the sidelines a little longer as renting is still the more affordable substitute,” he said.
