On Wednesday, according to data from the National Association of Realtors (NAR), existing home sales in the United States hit a low not seen in about 14 years in September, as potential homebuyers anticipate further declines in mortgage interest rates and more attractive housing prices.
The total annualized number of existing home sales in the U.S. fell to 3.84 million in September, with expectations of 3.88 million, and the previous month's figure was 3.86 million. The month-over-month decrease in existing home sales was 1%, compared to an expected increase of 0.5%, with the previous month's figure showing a 2.5% decrease. Unadjusted existing home sales were down 4.9% compared to the same period last year.
Over the past two years, the U.S. existing home market has essentially been stagnant. A primary reason is the so-called lock-in effect, where homeowners are reluctant to list their homes for sale and give up lower mortgage interest rates.
The median sales price of homes in September increased by 3% compared to the same period last year, reaching $404,500.
The inventory of existing homes in September was 1.39 million, a 23% increase compared to the same period last year. However, the current supply of homes is still below the levels seen before the COVID-19 pandemic. At the current sales pace, it would take about 4.3 months to deplete the market's supply, the highest in over four years, but still below the 5-month inventory-to-sales ratio, indicating that although inventory continues to rise, overall market supply remains relatively tight.
By region, in the four regions of the United States, existing home sales decreased in three of them, with the South region down by 1.7%, reaching the lowest level since early 2012. The Midwest region's transactions fell by 2.2%, reaching the lowest level in 13 years. The Northeast region decreased by 4.2%. The West region saw a 4.1% increase in sales, primarily driven by sales in California and Arizona.
NAR's data also shows that:
In September, 57% of homes sold had been on the market for less than a month, compared to 60% in August. 20% of homes were sold at a price above the listing price. Properties remained on the market for an average of 28 days in September, compared to 26 days in August.
In September, single-family home sales decreased by 0.6%, while sales of condominiums and co-ops fell by 5.1%.
Individual investors or second-home buyers purchased 16% of the homes, compared to 18% a year ago.All-cash sales accounted for 30% of transaction volume, up from 26% a month earlier.
First-time homebuyers made up 26% of purchases, tying the historical low previously set. Historically, first-time homebuyers typically represent around 40% of the market, indicating that many Americans are facing affordability challenges that exclude them from the market.
National Association of Realtors (NAR) Chief Economist Lawrence Yun stated:
"Despite the weaker sales figures in September, the factors typically associated with growth in home sales are developing. Consumers have more inventory options, mortgage rates are lower than a year ago, and the economy continues to add jobs."
Odeta Kushi, Deputy Chief Economist at the title insurance giant First American Financial Corp, said in a report last week:
"If mortgage rates fall to 5.8% next year, as some predict, approximately 12 million renter households could afford a median-priced existing home."
However, inventory issues may persist, as 84% of mortgaged homes have interest rates below 6%, thus the number of sellers who have an economic incentive to sell remains limited.
Existing home sales, which account for about 90% of the U.S. real estate market sales volume, are calculated at the time of transfer. Contracts are typically signed one or two months before the transfer, so the September sales data mainly reflect purchase decisions made in August and July.
Many buyers and sellers are waiting for housing financing costs to retreat from the current level of around 6.5%. Mortgage rates fell to a two-year low in September, but recent employment market and inflation data have strengthened expectations that the Federal Reserve will take a more gradual approach to interest rate cuts, causing mortgage rates to rise from their September lows.
This Thursday, the U.S. government will release September new home sales data, which is calculated based on contract signings and is considered a leading indicator of the U.S. real estate market.