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Higher mortgage rates and home prices are spooking buyers. Existing-home sales fell 2% in September compared to August, and are now down about 15% compared to a year ago, according to the National Association of REALTORS®’ newly released housing report. NAR’s existing-home sales report reflects completed transactions for single-family homes, townhomes, condos and co-ops.
“As has been the case throughout the year, limited inventory and low housing affordability continue to hamper home sales,” says Lawrence Yun, NAR’s chief economist. “The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains.”
NAR, joined by the National Association of Home Builders and the Mortgage Bankers Association, wrote a letter to Fed Chairman Jerome Powell last week saying that the Fed’s continued increases to its benchmark funds rate has “exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume.” The Fed’s moves have been blamed for pushing on mortgage rates, which have been in the 7% range over the last few weeks and most recently nearing 8% averages.
Combined with higher mortgage rates, home buyers continue to face rising home prices, too. The median existing-home sales price was $394,300 in September, up 2.8% compared to a year ago, NAR reports. All major regions of the U.S. have posted annual price increases.
“For the third straight month, home prices are up from a year ago, confirming the pressing need for more housing supply,” Yun says.
Indeed, adding to the challenges, buyers have been up against historically low levels of homes for sale. Total housing inventory at the end of September was at 1.13 million, up 2.7% compared to August but remain down 8.1% from last year’s already historically low levels, according to NAR’s latest report.
Still, homes that are for sale tend to sell fast. Sixty-nine percent of homes sold in September were on the market for less than a month. Properties typically remained on the market for 21 days in September, according to NAR’s housing data.
Faced with the headwinds of higher prices and mortgage rates, first-time home buyers have been backing away from the market. They comprised 27% of sales in September, down from 29% a year ago. On the other hand, all-cash buyers, who are immune to rising borrowing costs, are increasing their market share. All-cash sales accounted for 29% of transactions in September, up from 22% a year ago. Individual investors and second-home buyers tend to make up a major bulk of cash sales. They purchased 18% of homes in September, up from 15% a year earlier.
Regional Breakdown
Across the country, the Northeast was the only major region of the U.S. last month to post an uptick in sales. In fact, “the Northeast posted the strongest price gain resulting from higher demand coupled with inventory falling by 20%,” Yun explains. Meanwhile, “the West experienced softer price growth reflecting a pause after years of unsustainable and rapid price increases, especially in the Rocky Mountain region.”
Here’s a closer look at how existing-home sales fared across the country in September:
- Northeast: Sales rose 4.2% from August, reaching an annual rate of 500,000 in September. That is down 16.7% from September 2022. Median price: $439,900, up 5.2% from a year earlier.
- Midwest: Sales declined by 4.1% compared to the previous month, settling in at an annual rate of 930,000 in September. Sales are down 18.4% from a year ago. Median price: $293,300, up 4.7% from September 2022.
- South: Sales fell 1.1% compared to August, reaching an annual rate of 1.82 million in September. That marks a decrease of 11.7% from the previous year. Median price: $360,500, up 3.1% from a year earlier.
- West: Sales dropped 5.3% from the previous month, reaching an annual rate of 710,000 in September. Sales were down 19.3% from a year ago. Median price: $606,100, up 1.8% from September 2022.
