The U.S. housing market continued its slow pace in August, with existing-home sales registering a minor decline of 0.2% from the previous month. A new report from the National Association of REALTORS® (NAR) confirms that elevated mortgage rates and a persistent shortage of available homes are the primary factors restraining market activity.
Despite the monthly dip, the seasonally adjusted annual rate of 4.0 million sales represents a 1.8% increase compared to August of last year, indicating a slight improvement from a previously low baseline. However, rising home prices continue to present affordability challenges for many potential buyers across the country.
Key Takeaways
- Existing-home sales fell by 0.2% in August 2025 compared to July, reaching a seasonally adjusted annual rate of 4.0 million.
- The national median home price rose to $422,600, a 2.0% increase from the same period last year, marking 26 straight months of year-over-year price gains.
- Housing inventory stood at 1.53 million units, representing a 4.6-month supply at the current sales pace.
- Mortgage rates and limited inventory remain the two biggest obstacles for the housing market, according to NAR Chief Economist Lawrence Yun.
A Detailed Look at the August Market Data
The latest Existing-Home Sales report from the National Association of REALTORS® provides a comprehensive overview of the nation's housing sector. The data from August 2025 reveals a market grappling with competing pressures of high borrowing costs and sustained price growth.
While the month-over-month sales figure showed a slight contraction, the year-over-year comparison offers a different perspective. Sales in August 2025 were 1.8% higher than in August 2024, suggesting that the market has found a modest level of stability, albeit at a slower pace than in previous years.
Inventory and Supply Metrics
The total number of homes available for sale, or housing inventory, was 1.53 million units at the end of August. This figure is down 1.3% from July but remains higher than one year ago. This limited supply is a key reason why home prices continue to climb despite a reduction in sales activity.
A crucial metric for market health is the "months' supply," which estimates how long it would take to sell all current listings. In August, the supply was 4.6 months, a figure considered stable compared to July and an increase from 4.2 months in the previous year. A balanced market is typically considered to have a 6-month supply.
By the Numbers: August 2025
- Median Home Price: $422,600 (+2.0% YoY)
- Average Days on Market: 31 days (up from 28 in July)
- First-Time Buyers: 28% of sales
- All-Cash Sales: 28% of transactions
The Driving Forces Behind the Market Slowdown
According to NAR Chief Economist Lawrence Yun, the current state of the market can be attributed to two persistent challenges: high mortgage rates and a limited number of homes for sale. These factors create a difficult environment for both buyers and sellers.
"The two factors driving current sales activity are elevated mortgage rates and limited inventory," Yun stated in the report. He expressed optimism that a future decline in rates and an increase in available homes could lead to a rebound in sales.
Impact of Mortgage Rates
Borrowing costs remain a significant hurdle for prospective homebuyers. The average interest rate for a 30-year fixed-rate mortgage was 6.59% in August. While this is a slight decrease from the 6.72% average in July, it is substantially higher than the rates seen just a few years ago, directly impacting monthly payments and overall affordability.
Higher rates mean that for the same home price, a buyer's monthly mortgage payment is significantly larger. This has priced many individuals and families out of the market, particularly first-time buyers who do not have existing home equity to leverage.
The Inventory Challenge
The shortage of available homes, especially at affordable price points, continues to constrain the market. With 1.53 million homes for sale, buyers have fewer options to choose from. This lack of supply creates competition for desirable properties and prevents prices from falling, even as sales volume slows.
The tight inventory situation means sellers can often maintain their asking prices, contributing to the 26 consecutive months of year-over-year price increases. This dynamic creates a market that is challenging for buyers without being overwhelmingly favorable for sellers, who may struggle to find their next home after selling.
Regional Housing Market Performance Varies
The national housing market data provides a broad overview, but conditions differ significantly from one region to another. The August report highlighted these disparities, showing that affordability is a key determinant of local market strength.
Regional Sales and Price Snapshot (August 2025)
The performance of the housing market is not uniform across the United States. Here is a breakdown of month-over-month sales changes and median prices by region:
- Northeast: Sales decreased by 4.0%. The median price was $534,200, an increase of 6.2% from last year.
- Midwest: Sales increased by 2.1%. The median price was $330,500, an increase of 4.5% from last year. This region remains the most affordable.
- South: Sales decreased by 1.1%. The median price was $364,100, a slight increase of 0.4% from last year.
- West: Sales increased by 1.4%. The median price was the nation's highest at $624,300, up 0.6% from last year.
The Midwest stood out as the only region with significant sales growth, which Lawrence Yun attributed directly to its relative affordability. With a median price of $330,500, it offers a more accessible entry point for buyers compared to the coasts.
In contrast, the Northeast experienced the largest monthly sales decline and has the second-highest median price. The West, while seeing a small sales increase, continues to be the most expensive region in the country, with a median price exceeding $624,000.
Who is Active in Today's Market?
The NAR report also sheds light on the types of buyers and transactions shaping the current market. First-time homebuyers accounted for 28% of all sales in August, a figure consistent with July and a slight increase from 26% a year ago. This suggests that despite affordability challenges, new entrants are still finding ways to purchase homes.
Cash transactions remain a significant part of the market, making up 28% of all sales. These buyers are insulated from high mortgage rates, giving them a competitive advantage. Meanwhile, individual investors and second-home buyers were responsible for 21% of transactions, indicating continued interest in real estate as an asset class.
Distressed sales, such as foreclosures and short sales, represented only 2% of the market, a sign of financial stability among current homeowners and a lack of forced selling pressure on prices.
Outlook for Buyers and Sellers
The current market presents a mixed landscape. For prospective buyers, the slower pace of sales may offer more time for decision-making and potentially more room for negotiation than in the recent past. However, high prices and mortgage rates demand careful financial planning.
For sellers, the market still favors them in terms of pricing due to low inventory. Homes that are priced correctly and in good condition continue to sell, though the average time on the market has increased to 31 days. Patience and realistic pricing are more critical than ever.
Looking forward, the direction of the housing market will largely depend on the trajectory of mortgage rates and the ability of the construction industry to increase the supply of new homes. Any significant drop in rates could quickly bring sidelined buyers back into the market, potentially reigniting sales activity in the months to come.
