Sales of previously occupied homes fell to their lowest level in more than a year in August as rising mortgage rates and record prices for the month discouraged prospective buyers.

Existing home sales declined 2% from July to a seasonally adjusted annual rate of 3.98 million, the National Association of Realtors reported Thursday. The figure was slightly below the 4 million pace economists surveyed by FactSet had expected.

Sales were also down 1.2% from August 2025, marking the third consecutive monthly decline. The annual sales pace fell below 4 million for the first time since June 2025, when it stood at 3.93 million.

“Mortgage rates and home sales move in opposite directions, so it’s not surprising to see a mild dip in home buying activity due to high mortgage rates,” NAR chief economist Lawrence Yun said.

Mortgage rates have climbed since the war between the United States and Iran began in late February. Rising oil prices and expectations of higher inflation have pushed up long-term Treasury yields, which lenders use as a guide when setting mortgage rates.

The benchmark 30-year fixed mortgage rate reached an intraday high of 6.76% this week, its highest level in more than 14 months. The 10-year Treasury yield also climbed to about 4.9% on Thursday, its highest level since 2023.

Yun warned that the average mortgage rate could soon reach 7% if the 10-year Treasury yield continues to rise.

Home sales have remained near an annual pace of 4 million since 2023. That is well below the historical norm of about 5.2 million. Existing home sales were essentially unchanged in 2025 and remained at a 30-year low.

Despite the August decline, sales during the first eight months of 2026 were 1.6% higher than during the same period last year.

Yun said demand has received some support from wage growth and job creation. He cited 3.1% wage growth in August and a net 643,000 jobs added since the beginning of the year.

“Job creation and wage growth typically drive housing demand,” he said.

Affordability remains a major obstacle. The national median price for an existing home reached $429,100 in August, up 1.6% from a year earlier. It was the highest price recorded for the month of August since NAR began tracking the data in 1999.

Home prices have now increased annually for 38 consecutive months. Years of limited construction and a continuing shortage of available properties have helped keep prices elevated even as sales remain sluggish.

Inventory rose as the sales slowdown left homes on the market for longer. There were 1.62 million unsold homes at the end of August, up 3.2% from July and 5.9% from a year earlier.

That represented a 4.9-month supply at the current sales pace, the highest level in more than a decade. A supply of four to six months is generally considered a balanced market between buyers and sellers.

However, the number of available homes remains below the roughly 2 million listings that were typical before the COVID-19 pandemic.