In a disappointing turn for the housing market, home sales in September reached their lowest level since 2010. The combination of low inventory and high mortgage rates continues to put pressure on buyers, resulting in a significant decline in demand. According to the National Association of Realtors (NAR), sales of previously owned homes fell by 2% last month, reaching an annual rate of 3.96 million.
Despite the decline, the sales figures were slightly better than what was expected on Wall Street. Experts had forecasted existing-home sales to total 3.9 million in September. However, when compared to the same period in 2022, home sales have dropped by a staggering 15.4%.
Rising Prices and Limited Inventory
One key detail underlying these numbers is the rise in home prices. The median price for an existing home in September increased for the third consecutive month, reaching $394,300. This represents a 2.8% increase from the previous year and marks the highest price point for September since NAR began tracking the data.
The surge in prices was most pronounced in June 2022 when the median price of a resale home reached a peak of $413,800. Shockingly, around 26% of homes are currently being sold above their list price, according to NAR.
Inventory Shortages Reach Historic Lows
Another concerning trend is the significant decline in available housing inventory. September saw a drastic 8.1% decrease from last year, leaving only 1.13 million units available for sale. This represents the lowest housing inventory for September since 1999, emphasizing the severity of the situation.
Furthermore, properties are staying on the market for an average of 21 days, an increase from the previous month's average of 19 days. These numbers reflect the growing challenges faced by potential buyers who are forced to act quickly in a highly competitive market.
While national sales figures remain gloomy, there was a glimmer of hope in the Northeast region. Sales of existing homes increased by 4.2% in September compared to the previous month. The median price for a home in this region reached $439,900, illustrating regional disparities in the market.
As the housing market continues to grapple with rising mortgage rates and limited inventory, it remains uncertain when we will see a rebound in sales. However, for now, buyers must navigate a challenging landscape characterized by soaring prices and intense competition.
All-Cash Buyers Surge in Housing Market
The U.S. housing market is experiencing a significant slowdown, largely driven by high mortgage rates. This has caused a decrease in demand from homebuyers and has discouraged homeowners from selling due to the need to purchase another property. With mortgage rates as high as 8% for a 30-year loan, the future of existing-home sales looks bleak. In fact, real-estate brokerage Redfin predicts that sales in 2023 may be at their slowest pace since the housing bubble burst in 2008, with just 4.1 million units sold.
Lawrence Yun, chief economist at the National Association of Realtors, acknowledges that high mortgage rates and limited inventory have been ongoing issues throughout the year. He warns that the Federal Reserve needs to reconsider raising interest rates, considering the softening inflation and weakening job growth. Oversaturating the market with high interest rates could cause significant harm to the real estate industry. Yun also raises concerns about potential long-term effects on the "American way of life" as a result of the sales slowdown.
The housing market's decline has had a negative impact on stocks, with a noticeable decrease in early trading on Thursday. Additionally, the yield on the 10-year note (BX:TMUBMUSD10Y) has risen above 4.9%. Overall, the current state of the housing market indicates a challenging road ahead in the real estate industry.