Higher mortgage rates continued to impact home sales over the last month, with existing home sales declining in September for the eighth consecutive month, according to a report from the National Association of Realtors (NAR).
“The housing sector continues to undergo an adjustment due to the continuous rise in interest rates, which eclipsed 6% for 30-year fixed mortgages in September and are now approaching 7%,” NAR Chief Economist Lawrence Yun said in a statement. “Expensive regions of the country are especially feeling the pinch and seeing larger declines in sales.”
Per the report, existing single-family home, townhome, condominium and co-op sales fell by 1.5% from August to September, with three out of four major U.S. regions experiencing month over month contractions.
The seasonally adjusted sales rate for existing home sales also declined in all regions on a year over year basis. According to the NAR, home sales declined by 23.8% on a year over year basis, dropping to 4.71 million from 6.18 million in September 2021.
This is the 13th consecutive month in which year over year home sales have declined nationwide.
Sales of existing homes are now at the lowest level since 2014, excluding the decline that occurred during the pandemic, and home sales are expected to continue to decline over the next few months.
“Existing home sales are being impacted by higher mortgage rates,” housing analyst Bill McBride of Calculated Risk said in a post Thursday. “Rates have increased sharply in October, and that will impact closed sales in November and December – so I expect further declines in sales later this year.”
According to Freddie Mac, the average rate in September for a 30-year, conventional, fixed-rate mortgage was 6.11%, up from 5.22% the month prior. In contrast, the average rate in 2021 was 2.96%.
While higher mortgage rates have had a clear impact on existing home sales, it’s likely that rising home prices over the last 127 months (10.5 years, roughly) have also played a role.
As of September, the median home price was $384,800 for existing homes of all types, according to the NAR. That’s an 8.4% increase year over year compared to September 2021, when the median home price was $355,100. The year over year median price change peaked at 25.2% in May 2021.
The trend of month over month median home price growth has reversed course over the last few months, however. Per the report, September marked the third month in a row in which the median sales price retracted. The NAR cites regular seasonal price trends as the cause of the decline in median home price.
Housing inventory also decreased last month, but just slightly, dropping from 1.25 million available units in September from 1.28 million the month prior. Per the NAR, this drop in inventory was likely due, at least in part, to the seasonal inventory decline that typically occurs during December and January.
The months of supply remained unchanged from August to September at 3.2 months.
According to the NAR, the region that experienced the most significant decline in existing home sales was the South, with home sales declining by 1.9% from August to September, and by 23.8% from this time last year.
Existing home sales also declined in the Midwest, dropping by 1.7% from the month prior, and by 19.7% from September 2021. Home sales dropped in the Northeast as well, declining by 1.6% from August to September, and by 18.7% compared to September 2021.
The West was the only region that did not experience a decline in existing home sales month over month. Home sales in the West were identical from August to September, but were down 31.3% from the year prior.
But while home sales and inventory have declined across much of the nation, the trend of homes selling above list price has continued, according to Yun.
“Despite weaker sales, multiple offers are still occurring with more than a quarter of homes selling above list price due to limited inventory,” Yun said. “The current lack of supply underscores the vast contrast with the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today.”