U.S. existing home sales have hit their lowest level since 2010, showing signs of struggle within the housing market. Reports released indicate sales of previously owned homes decreased by 1% from August to September, reaching an annualized seasonally adjusted rate of 3.84 million units. This marks the slowest pace witnessed since October 2010, echoing concerns about affordability amid rising prices and mortgage rates.
According to the National Association of Realtors (NAR), the September sales figures were also down by 3.5% when compared to the same month the previous year. It’s been over 12 months since home sales have hovered roughly around the four-million-unit pace, leading many analysts to question the forces at play.
One bright spot within all this is the slight increase in housing inventory. The total number of homes available for sale rose 1.5% month-on-month, hitting 1.39 million units by the end of September. While this might seem like good news for buyers facing frustration from low inventory, the overall figure is still below the pre-pandemic count of around 1.8 million homes.
Lawrence Yun, the chief economist at NAR, addressed the current situation, stating, “Home sales have been stagnant around four million units for about the last year. Yet at the same time, factors usually linked with higher home sales, like improved job numbers and increased inventory, are coming to light.”
Nevertheless, potential home buyers seem to be stuck on the sidelines. An important consideration lies within the mortgage rates, which began hovering around 7% at the start of July but fell to just below 6.5% by August. Despite the lower rates, many first-time buyers have continued to step back, representing just 26% of the sales—a figure matching the lowest proportion on record.
First-time buyers’ hesitation can be largely attributed to rising home prices, which continue to climb year-over-year. The median price of existing homes sold during September was reported at $404,500—up 3% from the same month last year. While prices have seen some recent variability, September marked the 15th consecutive month of annual price increases, though this growth has started to decelerate.
Certain factors are causing buyers to adopt more cautious approaches. This includes the looming uncertainty tied to the upcoming presidential election, leading many to hesitate before making significant purchases. Both investors and first-time homebuyers are showing less aggression, as uncertainties around future taxation and property policies come to mind.
Yun's observations highlight the dilemma, stating, “While good news like more inventory could help stabilize prices, many consumers are delaying important decisions like purchasing homes due to potential economic shifts. This can lead to fluctuation and unease within the market.”
Analysis shows seasoned investors have also retreated; their share of home purchases dropped to 16% from 19% just the month prior. The weighted average of home prices seems to indicate they are continuing to hold, yet the increase is less fervent, as buyers are prioritizing payment capabilities and value.
Cash buyers are gaining ground within the market, making up about 30% of the total sales. This could reflect not only investor activity but also home sellers opting to sell their larger houses and exchange them for lower-cost homes to upgrade their financial agility. Interestingly, cash was not just utilized by investors; many homeowners are using their accumulated equity to fund purchases and navigate the market.
“The need for increasing visibility in housing options is evident; buyers desire more choices before making their purchases,” Yun remarked. “Yet the trend of limited distressed properties means many buyers are not seeing significant price drops, making negotiating tougher.”
Hurricane damage across several Southern states also played its part, contributing to the national decline in home sales figures. Both Hurricane Helene and Hurricane Milton wreaked havoc, with damage estimates prompting some markets to sideline potential buyers amid recovery efforts.
Other regions saw similar trends as the Northeast experienced sales fall by 4.2%, the West by 4.1%, and the Midwest by 2.2%. The South, noting regional differences, fell slightly with home buyers facing challenges of their own.
Despite the overall gloominess of this housing market news, analysts remain cautiously optimistic. Future sales may see improvement if mortgage rates drop consistently, easing some of the financial burdens facing prospective buyers coupled with greater inventory. The continuous job growth is another positive sign on the horizon.
Economists suggest the potential for increased activity, particularly as the fourth quarter of the year nears. Factors contributing to speculation indicate improved inventory might stimulate new sales transactions, leading to stronger demand as consumers become less apprehensive.
"Though current trends portray weak sales, there’s hope,” commented Nancy Vanden Houten of Oxford Economics. “Increasing supply can help alleviate price pressures and offer consumers more freedom to choose. This may allow for greater mobility within the market as we head toward year-end."
Collectively considered, U.S. existing home sales are facing unique dynamics, underscoring the need for adaptable strategies as consumers navigate unpredictability within the market. With thorough observation and careful engagement with conditions, there’s possibility for recovery and improved sales as the year culminates, albeit cautiously so. “WE are on the brink of needing to analyze patterns closely going forward,” Yun remarked, highlighting the importance of tracking market movements through the upcoming financial cycles. The coming months will surely put these sentiments to the test as homeowners and buyers alike look to redefine their approaches amid this fluctuative period.
