Sales of US existing homes fell in August for the first time in three months as the ongoing supply shortage and high prices kept buyers away from the market, according to industry data released Wednesday.

Sales dropped two percent last month to an annual rate of 5.88 million, seasonally adjusted, the National Association of Realtors (NAR) reported, which was slightly higher than analysts forecast.

The US real estate market has boomed during the Covid-19 pandemic, thanks to cheap mortgages spurred by the Federal Reserve's low interest rate policies and the disruptions to daily life caused by the virus.

The decline in in August followed two months of increases and came as prices continued to rise and the supply of homes on the market continued to dwindle.

"Although there was a decline in home purchases, potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory," NAR Chief Economist Lawrence Yun said.

High prices and tight inventory has cut into the booming US real estate market
High prices and tight inventory has cut into the booming US real estate market AFP / Frederic J. BROWN

Inventory as of the end of August was at 1.29 million units, 1.5 percent less than in July and 13.4 percent lower than a year ago. That equated to a 2.6-month supply at the current sales pace, unchanged from the prior month.

Average prices continued to climb, reaching $356,700, 14.9 percent higher than the same month last year.

All regions of the United States saw sales drop, the biggest the South's three percent decrease. The West saw the smallest fall of 0.8 percent, while sales declined by 1.4 percent in the Northeast and Midwest.

"We expect existing home sales to mostly move sideways over the rest of 2021 as the market contends with a familiar mix of headwinds and tailwinds" such as tight inventories and short supply, Nancy Vanden Houten of Oxford Economics said.

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