• August existing home sales fell 0.9 percent from July to 5.33 million units at a seasonally-adjusted annual rate (SAAR), the second consecutive month of contracting sales.
• Inventory of existing homes on the market has been contracting for 14 months straight.

After defying market expectations and showing surprising strength for much of the spring, late-summer doldrums are starting to hit the home sales market.

August existing home sales fell 0.9 percent from July to 5.33 million units at a seasonally adjusted annual rate (SAAR), according to the National Association of Realtors. It was the second consecutive month of contracting sales and the second straight month in which sales undershot forecasts.

Compared to August 2015, existing home sales are up 0.8 percent. But a wider view suggests the market has hit a ceiling: Sales have been unable to break out of the 5.3 million to 5.6 million range where they have fluctuated for 14 months (figure 1). On average, existing home sales have been flat since May 2015. While sales of existing single family homes fell 2.3 percent over the month, sales of condos and coops jumped 10.5 percent.

July existing home sales data were also revised downward by 10,000 units to 3.38 million units (SAAR), widening what initially appeared to be a 3.2 percent decline in sales from June to an updated 3.4 percent drop.

Tight inventory continues to weigh on the market. The number of existing homes on the market fell 3 percent from July to 1.89 million units (SAAR), down 10.2 percent over the year. Inventory has now been contracting on an annualized basis for 14 consecutive months, and is at its lowest levels since late 2000. The number of existing homes for sale in August was the third-lowest on record since the data series begins in January 1999.

The inventory crunch has been much more acute among single-family homes than for condos and coops. Single-family home inventory is down 10.5 percent from last year, while condo/coop inventory is down 5.9 percent. Tight inventory on its own is not necessarily a signal of market dysfunction, and could instead reflect higher transaction velocity and better inventory management practices.

The median seasonally-adjusted price of existing homes sold in August was $230,400, 0.9 percent higher than the median price of existing homes sold in July and 5.3 percent above the median price of existing homes sold in August 2015. It was just short of the all-time high for median sales price of $231,300, reported in April 2016.