Despite improvements in mortgage rates and the supply of homes on the market, potential homebuyers continued to wait in September as sales of existing homes declined for the sixth time in seven months.
The 1% drop last month left existing home sales at a seasonally adjusted annual rate of 3,840,000, the lowest level since 2010, according to the National Association of Realtors. That figure has hovered around the 4 million mark for the past year as prices reached record highs and mortgage rates eclipsed 7%. As a comparison, existing home sales reached a high point during the pandemic with a seasonally adjusted annual rate of 6,600,000 in January 2021.
Though rates dropped closer to 6% in September, prices haven’t budged much, and earlier this month rates crept back upward.
It's possible a recovery in existing home sales is just around the corner as people negotiate the homebuying process, NAR economist Lawrence Yun said. He noted that homes are staying on the market an average of 28 days, compared to 21 days a year ago, and more would-be buyers are demanding home inspections.
“We know the homebuyer process is a long one. Perhaps higher sales will show up a little later,” Yun said.
Decision delays
Yun forecast that sales will exceed 4 million in the final three months of the year. The upcoming November election is one factor that may be causing people to delay buying decisions, he said.
As an example of how the election may be weighing on people’s minds, investors’ share of existing home purchases fell in September to 16% from 19% the previous month. Yun said that could be attributed to investors’ uncertainty about what tax policies will look like in the next couple of years.
Instead of investors, more buyers were individuals or families buying houses with cash. All-cash deals made up 30% of all sales last month, up from 20% before the pandemic began in 2020. Yun said many of them are likely homeowners trading down from a larger house or using the equity accumulated in their property.
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Hurricanes Helene and Milton caused substantial damage in Florida, North Carolina and other parts of the South in late September and early October, and that might have contributed slightly to the national decline in sales, Yun said.
The South saw a 1.7% drop in sales from August; they fell 2.2% in the Midwest, 4.1% in the West and 4.2% in the Northeast.
The supply of homes on the market was about 1.4 million at the end of September, a 23% increase from one year ago but still below the pre-pandemic level of 1.8 million.
The median price for all housing types in September was $404,500, the 15th straight month of year-over-year increases but down from $416,700 in August.
“Increases in supply are weighing on home price growth; median home prices fell for a third straight month in September,” Nancy Vanden Houten of Oxford Economics said in a statement. “We expect resilient demand to keep a floor under home prices, particularly if mortgage rates resume their decline as we expect.”