Real estate agent Rebecca Van Camp puts a “Sold” sign on her sign in front of a home in Meridian, Idaho, on Wednesday, October 21, 2020.
Darin Oswald | Tribune News Service | Getty Images
Existing homes are selling at the slowest pace since September 2012, except for a brief decline at the start of the Covid 19 pandemic.
According to a monthly survey by the National Association of Realtors, sales of previously owned homes declined 1.5% in September from August to a seasonally adjusted annual rate of 4.71 million units.
That was the eighth consecutive month of sales declines. Sales were down 23.8% year over year.
The sharply higher mortgage interest rate is causing an abrupt slowdown in the housing market. The average interest rate on the 30-year fixed home loan is now just over 7%, after starting around 3% this year. That makes an already expensive housing market even less affordable.
Despite the slowdown in sales, inventory continues to fall. At the end of September there were 1.25 million homes for sale, 0.8% less than in September 2021. At the current sales rate, this amounts to an offer of 3.2 months. Six months is considered a balanced supply.
“Despite weaker sales, multiple listings are still taking place, with more than a quarter of homes selling above list price due to limited inventory,” said Lawrence Yun, chief economist at the NAR. “The current lack of supply underscores the stark contrast to the previous major market decline from 2008 to 2010, when inventory levels were four times what they are today.”
The tight supply continues to put pressure on house prices. The median price of an existing home sold in September was $384,800, up 8.4% from September 2021. Prices rose across all price ranges. This makes 127 consecutive months of annual increases.
However, prices are cooling. September marked the third month-to-month decline in prices in a row, which usually falls during this time of year.
However, they are falling harder this year, especially at the lower end of the market, where the stock is much leaner. Homes priced between $100,000 and $250,000 were down 28.4% from a year ago, while sales of homes priced between $750,000 and $1 million were down 9.5%.
Houses were on the market for slightly longer in September, on average 19 days, compared to 16 days in August and 17 days in September 2021.
Higher mortgage rates don’t just scare off potential buyers. They also keep sellers on the sidelines, contributing to inventory scarcity.
“Homeowners like their 3% mortgage interest, and they don’t want to give that up,” Yun said.
