WASHINGTON: Sales of previously owned US homes fell in August, according to industry data released Thursday, but lower mortgage rates and growing supply are likely to boost the industry.

Existing home sales dropped 2.5 percent last month from July to an annual rate of 3.86 million, seasonally adjusted, said the National Association of Realtors (NAR). This was largely in line with the 3.90 million consensus that analysts expected.

“Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months,” said NAR chief economist Lawrence Yun.

He added in a statement that more inventory means homebuyers will be in a better position to find properties at favorable prices. Homebuyers in the United States have been grappling with a sharp rise in mortgage rates after the US central bank rapidly lifted the benchmark lending rate in 2022 to tackle inflation. But with growing expectations that the Federal Reserve was going to pivot to rate cuts after holding rates at a decades-high level for months, mortgage rates have also shifted lower.

The popular 30-year fixed-rate mortgage averaged 6.2 percent as of September 12 according to Freddie Mac — reaching the lowest level since February 2023.

A year ago, the rate was around 7.2 percent. On Wednesday, the Fed kicked off a process of easing monetary policy with a bold half-percentage-point rate reduction, adding to expectations that mortgages rates would fall further. Compared with a year ago, NAR data showed that existing home sales were 4.2 percent down in August. The median price increased 3.1 percent from August 2023 to $416,700, with all four US regions seeing price jumps. Yun told a press call on Thursday that although home sales are struggling, home prices remained high.

Meanwhile, the number of Americans filing new applications for unemployment benefits dropped to a four-month low last week, pointing to solid job growth in September and offering confirmation that the economy continued to expand in the third quarter. The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed unemployment rolls shrunk to levels last seen in early June. The US central bank on Wednesday cut interest rates by 50 basis points, the first reduction in borrowing costs since 2020, which Federal Reserve Chair Jerome Powell said was meant to demonstrate policymakers’ commitment to sustaining a low unemployment rate. “These hard numbers confirm the message delivered by Fed Chair Powell yesterday,” said Carl Weinberg, chief economist at High Frequency Economics.

“The labor market is softening but not imploding as you would expect in a recession. Fed policy is aimed at supporting the job market before a recession shapes up.”

Initial claims for state unemployment benefits dropped 12,000 last week to a seasonally adjusted 219,000 for the week ended Sept. 14, the lowest level since the middle of May, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.

Unadjusted claims increased by 6,436 to 184,845 last week, amid notable rises in California, Texas and New York, which more than offset a decrease of 2,055 in Massachusetts. The labor market has cooled considerably, with a big step-down in hiring and a decrease in job openings, which has raised concerns of a deterioration in conditions that could undermine the economic expansion. Layoffs, however, remain low, which is helping to prop up the economy, through solid consumer spending. — Agencies