US Home Sales Show Slowdown as Mortgage Rates Climb

Sales of previously occupied homes in the U.S. increased by 1.5% in September compared to August, reaching a seasonally adjusted annual rate of 3.99 million units. However, this figure represents a 2.2% decrease from September of the previous year, indicating a continued slowdown in the housing market. The National Association of Realtors (NAR) reported these figures, noting that August sales were revised downward, contributing to the September monthly increase.

The current annual sales pace has remained below 4 million for two consecutive months, a trend that began in August. This is significantly lower than the historical norm, which hovers closer to 5.2 million units annually. The latest sales tally slightly surpassed economists' expectations of 3.98 million units, according to FactSet.

Accompanying the sales data, home prices continued their upward trajectory. The U.S. median sales price for existing homes rose 1.3% in September from a year earlier, reaching an all-time high of $417,500 for the month of September, based on data dating back to 1999. Home prices have now seen year-over-year increases for 39 consecutive months.

Lawrence Yun, NAR's chief economist, described the market as "very tough out there, especially with mortgage rates rising." The housing market has been experiencing a slump since 2022, marked by a significant climb in mortgage rates from their pandemic-era lows. Last year, sales of existing homes were largely stagnant, falling to a 30-year low.

This year's sluggish sales are largely attributed to rising borrowing costs. Mortgage rates have been on an upward trend since late February, influenced by expectations of increased inflation amid surging oil prices. These factors have pushed up long-term bond yields, which lenders use to set rates for home loans.

The average rate for a 30-year fixed mortgage reached 7.4% last week, the highest in nearly three years. This sharp increase in mortgage rates, which can add hundreds of dollars to monthly payments, has prompted many potential buyers to postpone their home-buying plans.

Despite the challenges, buyers who can afford current rates or pay in cash are finding a wider selection of homes than in recent years, as properties are remaining on the market for longer periods. Although overall inventory remains below historical levels, 1.6 million unsold homes were available at the end of September, the highest number of unsold properties since November 2019. Unsold inventory increased by 1.9% from August and 4.6% from September of the previous year. The current inventory represents a 4.8-month supply at the prevailing sales pace, which falls within the traditional range of a balanced market between buyers and sellers (4-6 months).