U.S. existing home sales slowed for the eighth straight month in September as rising mortgage rates, surging inflation and steep home prices continued to push prospective buyers out of the market.
Sales of previously owned homes tumbled 1.5% in September from the previous month to an annual rate of 4.71 million units, according to new data released Thursday by the National Association of Realtors (NAR). That is slightly better than what economists were expecting, according to Refinitiv.
On an annual basis, home sales plunged 23.8% in September.
"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. "Expensive regions of the country are especially feeling the pinch and seeing larger declines in sales."
There were about 1.25 million homes for sale at the end of September, according to the report, a decline of 2.3% from August and down 0.8% from last year. Despite more homes sitting on the market, homes still sold on average in just 19 days. Before the pandemic, homes typically sat on the market for about a month before being sold.
At the current pace of sales, it would take roughly 3.2 months to exhaust the inventory of existing homes. Experts view a pace of six to seven months as a healthy level.
The interest rate-sensitive housing market has borne the brunt of the Federal Reserve's aggressive campaign to tighten policy and slow the economy. Policymakers already lifted the benchmark federal funds rate five consecutive times – including three 75-basis-point increases in June, July and September – and have shown no sign of slowing down as they try to crush inflation that is still running near a 40-year high.
The average rate for a 30-year fixed mortgage climbed to 6.94% this week, according to the latest data released Thursday from mortgage lender Freddie Mac. That is significantly higher than just one year ago when rates stood at 3.09%.
But even with higher interest rates putting homeownership out of reach for millions of Americans, prices are still steeper than just one year ago. The median price of an existing home sold in September was $384,8000, an 8.4% increase from the same time a year ago. This marks the 127th consecutive month of year-over-year home price increases, the longest-running streak on record.
However, prices did decline slightly from the high of $413,800 recorded in June, part of a usual trend of prices declining after peaking in the early summer.