Key Points: – Home sales dropped by 1.0% in September to the lowest level since 2010. – Housing inventory rose 1.5%, but prices remained elevated, increasing 3% year-over-year. – First-time homebuyers made up only 26% of sales, below the 40% needed for a robust market. |
U.S. existing home sales fell to their lowest level in 14 years in September, reflecting ongoing challenges in the housing market as buyers continued to hold out for lower mortgage rates. According to the National Association of Realtors (NAR), home sales dropped 1.0% last month, bringing the seasonally adjusted annual rate to 3.84 million units, the lowest figure since October 2010. The decline surprised economists, who had forecasted no change at 3.86 million units.
The year-on-year picture was equally bleak, with sales down 3.5% from September 2023, marking a continuing trend of sluggish demand following the spike in mortgage rates earlier this year. While rates briefly dropped after the Federal Reserve’s recent decision to cut interest rates, they have climbed again over the last three weeks, fueled by strong economic data that has led traders to scale back expectations of further rate cuts next month.
The NAR speculated that the upcoming U.S. presidential election on November 5 might also be contributing to buyer hesitancy, although there is no hard evidence supporting this claim. “Some consumers may be delaying a major financial decision like purchasing a home until after the election,” noted Lawrence Yun, NAR’s chief economist. He added, however, that market conditions—such as more available inventory, lower mortgage rates compared to last year, and job gains—remain favorable for buyers who choose to act now.
Despite the increase in housing supply, prices have not dropped as some buyers had hoped. The median existing home price rose 3.0% year-over-year to $404,500 in September, with home prices increasing across all regions of the country. Housing inventory climbed 1.5% to 1.39 million units, the highest level since October 2020, providing buyers with more options, though still not enough to significantly lower prices.
At the current pace of sales, it would take 4.3 months to exhaust the existing supply of homes, up from 3.4 months a year ago. A balanced market typically has a supply range of four to seven months, so while the increase in inventory is welcome, it has yet to shift the balance enough to bring prices down.
First-time homebuyers continue to struggle in this market, making up only 26% of transactions, a slight drop from 27% last year. This is well below the 40% share that economists and realtors say is necessary for a healthy housing market. Many first-time buyers are being priced out due to high home prices and elevated borrowing costs.
Additionally, 30% of transactions in September were all-cash sales, up from 29% a year ago, as wealthier buyers and investors continue to dominate the market. Distressed sales, including foreclosures, made up just 2% of total transactions, similar to last year’s figures, indicating that most homeowners are not under extreme financial pressure to sell.
As the housing market continues to face uncertainty around mortgage rates and economic conditions, prospective buyers remain cautious. With elevated prices, and only modest improvements in supply, it is unclear when the market might see a full recovery in sales activity.