After experiencing a flat August, existing home sales retreated in September, falling to the lowest level in nearly three years.
Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 3.4% from August to a seasonally adjusted rate of 5.15 million in September, according to the latest report from the National Association of Realtors. The report showed sales are 4.1% below September 2017's rate.
NAR Chief Economist Lawrence Yun said that the decline in regional sales can be attributed to rising interest rates and the continuing climb of home prices.
“This is the lowest existing home sales level since November 2015,” Yun said. “A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”
The median existing home price for all housing types increased to $264,800, surpassing last August’s $258,100. This is a 4.2% increase from September last year and marks the 79th straight month of year-over-year gains.
Total housing available for sale fell backwards from August, decreasing from 1.91 million existing homes on the market to 1.88 million in September. But it's up from last year’s total of 1.86 million.
Unsold inventory rests at a 4.4-month supply at the current sales pace, increasing from last month’s total of 4.3. The total was 4.2 months a year ago at this time.
“There is a clear shift in the market with another month of rising inventory on a year over year basis, though seasonal factors are leading to a third straight month of declining inventory,” Yun continued. “Homes will take a bit longer to sell compared to the super-heated fast pace seen earlier this year.”
Properties stayed on the market an average of 32 days in August, moving up from 29 days in August but still down from 34 days in 2017. The report states that 47% of homes stayed on the market for less than a month.
The report states, the average commitment rate for a 30-year, conventional, fixed-rate mortgage climbed from 4.55% the month prior to 4.63% in September and the average commitment rate for all of 2017 remained at 3.99%, according to Freddie Mac.
“Rising interests rates coupled with increasing home prices are keeping first-time buyers out of the market, but consistent job gains could allow more Americans to enter the market with a steady and measurable rise in inventory,” Yun stated.
First-time buyers were 32% of sales in September, which is an increase from 31% in August and 29% in September of last year. NAR revealed that the annual share of first-time buyers remained at 34%.
“Despite small month over month increases, the share of first-time buyers in the market continues to underwhelm because there are simply not enough listings in their price range,” NAR President Elizabeth Mendenhall said.
Single-family home sales edged down from a seasonally adjusted annual rate of 4.74 million in August to 4.58 million in September 4% below 4.77 million a year ago. The median existing single-family home price was $260,500 in September, increasing 4.6% from September 2017.
Existing condominium and co-op sales recorded a seasonally adjusted annual rate of 570,000 units in September, falling 3.4% from August and 5% from a year ago. The median existing condo price was $239,200 in September, slightly increasing 1.5% from 2017.
Existing home sales in the Northeast fell 2.9% to an annual rate of 680,000 in September, which is a 5.6% drop from a year ago. The median price in the Northeast increased 4.1% from September 2017 and came in at 286,200.
In the Midwest, existing-home held steady from the prior month at an annual rate of 1.28 million but is still 1.5% below September 2017. The median price in the Midwest was $200,200, increasing 1.9% from this time last year.
Southern existing-home sales declined 5.4% to an annual rate of 2.11 million in September, decreasing from 2.1 million a year ago. The median price in the South was $223,900, increasing 3% from September 2017.
“Led by a 5.4% decline in the South, the drop in existing-home sales in September was likely somewhat related to the impact from Hurricane Florence,” Mortgage Bankers Association Chief Economist Mike Fratantoni said. “Beyond that, housing demand still remains strong, and is bolstered by an incredibly healthy job market.”
Existing home sales in the West fell 3.6% to an annual rate of 1.08 million in September, which is 12.2% below September 2017. The median price in the West was $388,500 increasing 4.1% from this time last year.
“With this underwhelming report, we’re seeing how strong the effects of rising prices and sagging inventory really are on the market. Normally, the existing home market is more affordable and accessible for homebuyers and can rely more on a stock of inventory when new supply is tough to come by, but even this segment has not been insulated from the housing market’s broader price and supply challenge,” TIAA Bank Executive Vice President John Pataky said.
“If inventory rises, wage growth continues to draw closer to home price growth, and the rest of the economy remains strong, the market might have the ingredients it needs to cook up a turnaround,” Pataky concluded. “Otherwise, we’ll continue to see less-than-uplifting results.”