In September, the housing market faced challenges as sales of previously owned homes decreased by 1% from August, landing at a seasonally adjusted annualized rate of 3.84 million units. This marks the slowest rate of sales the market has seen since October 2010, as reported by the National Association of Realtors (NAR). Compared to September 2022, the sales dropped by 3.5%, indicating a broader trend of stagnation in the market. The data reflects closings that likely stemmed from agreements made in July and August, highlighting a potential lag between market activity and sales figures.
The downturn in sales was not uniform across the United States; three of the four regions reported a decline, with only the West exhibiting growth. This regional disparity could be attributed to varied economic conditions and housing demand across the country. Lawrence Yun, the chief economist at NAR, points out that the volume of home sales has maintained a steady pace of around four million units over the past year. Despite this stagnation, he notes that factors typically associated with increased sales are beginning to emerge, hinting at a possible change on the horizon.
Mortgage rates played a pivotal role in shaping the housing landscape in September. Beginning July with rates close to 7% on 30-year fixed loans, the market saw a modest decline, reaching just below 6.5% by August. Presently, these rates are more than a full percentage point lower than they were a year prior, a change that could potentially stimulate buyer interest. However, the increase in inventory, which rose by 1.5% month-over-month to 1.39 million homes, provides a somewhat mixed signal. With a 4.3-month supply available at the current pace, the rising inventory is positive news for buyers seeking more options. Yet, the overall situation reveals a lack of distressed properties, as the mortgage delinquency rate remains low, with only 2% of transactions involving distressed sales.
The persistent pressure of low inventory continues to exert upward pressure on home prices. In September, the median home price reached $404,500, reflecting a 3% year-over-year increase, marking the 15th consecutive month of rising prices. This situation has reinforced the importance of cash in the market, with cash transactions comprising 30% of September sales—significantly higher than the pre-COVID figure of around 20%. Remarkably, investor participation dipped slightly, dropping from 19% of sales in August to 16%, signaling a shift in buyer dynamics.
Furthermore, homes are experiencing longer days on the market, averaging 28 days compared to 21 days the previous year. This trend indicates a shift in buyer confidence, particularly among first-time homebuyers, who accounted for only 26% of sales in September, down from previous months. The declining presence of this demographic suggests increased challenges in affordability and access to the housing market.
In sum, the September housing market reflects a complex interplay of stagnation, rising prices, and shifting buyer behavior. While increased inventory offers a glimmer of hope for potential buyers, ongoing economic challenges and the high prevalence of cash transactions create a competitive market that continues to reward those with substantial financial resources. As the landscape evolves, it is crucial for all stakeholders to remain attuned to changing trends and emerging opportunities amidst the fluctuating real estate environment.