U.S. home sales fell in September to the lowest level since the Great Recession

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The numbers: Home sales in September fell to the lowest level since 2010, as high mortgage rates continue to hammer the housing market.

Aside from low inventory, rising rates are eroding buyers’ purchasing power, and drying up demand. Sales of previously owned homes fell by 2% to an annual rate of 3.96 million in September, the National Association of Realtors said Thursday.

That’s the number of homes that would be sold over an entire year if sales took place at the same rate every month as they did in September. The numbers are seasonally adjusted.

The drop in sales was slightly better than what Wall Street was expecting. They forecasted existing-home sales to total 3.9 million in September.

Compared to September 2022, home sales are down by 15.4%. 

Key details: The median price for an existing home in September rose for the third month in a row to $394,300. Prices are up 2.8% from a year ago. That was the highest price for the month of September since NAR began tracking the data.

Home prices peaked in June 2022, when the median price of a resale home hit $413,800.

Around 26% of properties are being sold above list price, the NAR noted.

The total number of homes for sale in September fell by 8.1% from last year, to 1.13 million units. Housing inventory for the month of September was the lowest since 1999, when the NAR began tracking the data.

Homes listed for sale remained on the market for 21 days on average, up from the previous month. Last September, homes were only on the market for 19 days.

Sales of existing homes rose only in the Northeast in September, as compared with the previous month, by 4.2%. The median price of a home in the region was $439,900. 

All-cash buyers made up 29% of sales, highest since January 2023. The share of individual investors or second-home buyers was 18%. About 27% of homes were sold to first-time home buyers.

Big picture: The U.S. housing market is in the midst of a serious slowdown that is primarily driven by high mortgage rates. High rates spook home buyers, drying up demand, and high rates also deter homeowners from selling since they may have to purchase another home. For a homeowner with a 3% mortgage rate for the next few decades, there’s little incentive to move.  

And the residential sector is likely to see sales fall further in October’s data, as the 30-year mortgage inches even higher. Demand for mortgages has collapsed, and some outlets like Mortgage News Daily are quoting a rate of 8% for the 30-year.

Existing-home sales in 2023 could fall to the slowest pace since the housing bubble burst in 2008, real-estate brokerage Redfin said on Thursday, at a 4.1 million pace. 

What the realtors said: “Mortgage rates and limited inventory has been the story throughout this year — no different this month, other than the fact that interest rates are moving higher,” said Lawrence Yun, chief economist at the National Association of Realtors. 

“The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains,” he added. “We don’t want the Fed to overdo it and cause great harm to real estate.” 

Yun also questioned whether there will be a “fundamental change” or a temporary one to the “American way of life” due to the slowdown in sales.

What are they saying? “There’s no relief in sight for the battered U.S. housing market absent a sharp drop in mortgage rates—the 30-year fixed rate averaged 7.20% in September, the highest in over two decades—and a surge in inventory which would go a long way toward improving affordability,” Jay Hawkins, senior economist at BMO Capital Markets, wrote in a note.

Market reaction: Stocks were down in early trading on Thursday. The yield on the 10-year note
rose above 4.9%.

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