As a result of rising interest rates and housing prices, a greater percentage of prospective purchasers were unable to purchase a home in September, driving down the housing market to their lowest level since the foreclosure crisis.
According to a monthly survey from the National Association of Realtors, historically low inventories of houses for sale continued to drive up prices, while rates that went over 7% in August drove sales down to their lowest level in 13 years.
Existing residences, which include single-family homes, townhomes, condominiums, and co-ops, had a median price of $394,300 in the previous month. The price of homes in September reached a record high thanks to that increase, which was 2.8% higher than a year earlier and the third straight month of price increases.
According to the NAR study, prices increased across the board in the Northeast, Midwest, South, and West of the country.
Sales of existing homes decreased 2% from August to September to a seasonally adjusted annual rate of 3.96 million units, marginally beyond analysts’ predictions, as a result of low supply and high prices.
Annually, sales in September decreased by 15.4% from the same month last year, when 4.68 million units were sold.
Home sales are being hampered, as they have been all year, by a lack of inventory and high housing costs, according to Yun. “Given that inflation has slowed and job growth has slowed, the Federal Reserve simply cannot keep raising interest rates.”
Analysts anticipate further monthly declines in home sales throughout the remainder of the year because the Fed has stated its benchmark rate will be “higher for longer” and mortgage rates will also remain higher.
Sales were expected to decline by 10% to 15% for the entire year, according to our initial projections, said Yun. “It’ll be closer to a 20% increase from last year.
Prices remain high due to a lack of inventory.
While many buyers still struggle with affordability, it is also tough to find a property to buy, which is having an effect on sales.
According to ICE Mortgage Technology, which recently bought mortgage data company Black Knight, more than 90% of homeowners with mortgages have rates at 6% or lower. That prevents homeowners from selling because doing so would require taking on debt at rates that are already running over 7%.
As a result of homeowners sticking put, inventories have fallen to historically low levels—roughly half of what they were before the pandemic.
There were 1.13 million units on the market at the end of September. Although it was up 2.7% from August, it was down 8.1% from a year earlier. The market has 3.4 months’ worth of inventory if sales continue at their current rate. A 5 or 6-month supply of homes would indicate a more balanced market.
Bottom Line
Analysts question if this is a transient condition or if homeownership is entering a new age as the high cost of purchasing a home continues to be a barrier for many individuals.
High prices don’t just prevent people from becoming homes and accumulating equity and wealth; they are also affecting the demographics of those who do.
