U.S. home sales continued to slow down in September, reaching the weakest annual pace seen nearly 14 years. Despite easing mortgage rates, the housing market remains sluggish, reflecting the impact of soaring prices and economic uncertainty on buyers.
According to the National Association of Realtors (NAR), the sales of previously occupied homes dipped by 1% from August, arriving at a seasonally adjusted annual rate of 3.84 million. This marks the second consecutive monthly decline, positioning it as the slowest pace since October 2010, which was during the aftermath of the late-2000s real estate crash.
Year-over-year, existing home sales fell by 3.5%, with the Northeast, South, and Midwest all experiencing declines, though the West saw some increases. These latest numbers fell short of the 3.9 million pace economists were projecting, showing just how difficult the market is for prospective homebuyers.
“The factors typically promoting home sales — significantly lower mortgage rates, rising inventory, and job growth — are present, yet activity remains low,” commented Lawrence Yun, NAR's chief economist. “There may be hesitance among buyers, particularly as they weigh major expenditures like home purchases against the backdrop of the upcoming elections.”
Despite the slowdown, home prices have been climbing. The national median sales price for existing homes rose 3% year-over-year, reaching $404,500. This figure is significantly higher, about 49%, than it was five years ago, highlighting the growing divide between property values and wage growth, which has only risen by about 25% during the same timeframe.
The continuous rise of home prices, combined with limited availability and high mortgage rates, has made homeownership seem out of reach for many Americans, thereby transforming itinto a pivotal political issue heading toward next month’s elections.
The slump seen within the housing market can be traced back to 2022, which was when mortgage rates began to climb from the historically low levels seen during the pandemic. The surge led to existing home sales plummeting to nearly 30-year lows last year, as the average rate on a 30-year mortgage reached its highest point since 2000, nearing 8%.
Mortgage rates had shown some respite recently. Since July, rates softened as the Federal Reserve anticipated cutting its main interest rate for the first time in over four years. This pivot could potentially lead to lower mortgage rates. For example, as of October 17, the average 30-year fixed mortgage rate was reported at 6.44%, dipping from 7.63% at the same time last year.
Interestingly, amid the decreasing sales, the inventory of unsold existing homes saw some improvement, rising by 1.5% to 1.39 million homes. An increase in inventory could empower buyers who faced severe shortages throughout last year. Yun emphasized, “More inventory is certainly good news for home buyers as it gives consumers more properties to view before making any decisions.”
Meanwhile, the National Association of Home Builders (NAHB) reported on sales within the new home segment, which also felt the impact of rising costs and fluctuated mortgage rates. All-cash purchases comprised 7.9% of new home sales during the third quarter of 2024, marking the highest share for this year but the lowest for the third quarter since 2022. This trend indicated how buyers with cash offers were seeking to leverage the financing uncertainty.
Despite the drop-off in sales, the median new home purchase price reached $420,400, with conventional loans outpacing other financing types. Sales reliant on cash have decreased by 21.1% year-over-year, showing how tougher conditions are impacting buyer behavior. Interestingly, financing through conventional loans achieved 75.1% of the market share, its highest level since 2022.
What’s behind these declining cash sales? Many buyers seem to be adjusting to the tightened conditions caused by increasing interest rates. With FHA-backed and VA-backed sales seeing drops as well, the market dynamics have begun shifting. For first-time buyers, it’s especially tough; statistics show they’re struggling to gain footholds as prices continue to climb faster than wages.
The decline of cash sales points to broader trends relating to affordability. With home prices steep, many buyers find themselves unable to proceed. NAR Chief Economist Yun reflected on this, stating, “Homeownership has become increasingly elusive for many Americans as years of rising costs outpace wage growth, even as some hopeful signs emerge from the market.”
So what does this mean for the future? The U.S. housing market is experiencing one of its most significant slowdowns, with home prices still increasing and overall demand continuing to dwindle. Amid these challenges, buyers remain hopeful; they’re just waiting for the right time to jump back. With elections looming, housing will likely stay considered as both policymakers and consumers navigate these turbulent waters.
