Sales of existing homes in the U.S. climbed to a seven-month high in September, increasing 1.5% from August to a seasonally adjusted annualized rate of 4.06 million units, according to the National Association of Realtors. While slightly below analyst forecasts, sales were up 4.1% compared to September of the previous year.
The increase is largely attributed to declining mortgage rates. The data, which reflects contracts signed in July and August, corresponds with a period of improving housing affordability. “As anticipated, falling mortgage rates are lifting home sales,” said Lawrence Yun, NAR’s chief economist. The average rate on a 30-year fixed mortgage, which was 6.67% at the start of July, has since fallen to 6.17%.
On a regional basis, the West saw the strongest monthly sales growth, while the Midwest was the only region to post a decline. Annually, sales were strongest in the South and Northeast.
Despite recent improvements, housing inventory remains tight. The number of homes for sale rose 14% from a year ago to 1.55 million units, representing a 4.6-month supply at the current sales pace. A six-month supply is typically considered a balanced market. “Inventory is matching a five-year high, though it remains below pre-Covid levels,” Yun noted, adding that financially stable homeowners mean there are few distressed properties on the market.
This limited supply continues to exert upward pressure on prices. The median price for a home sold in September was $415,200, a 2.1% year-over-year increase and the 27th consecutive month of annual gains. Home prices are now 53% higher than they were before the pandemic.
The market’s high end is seeing the most activity, with sales of homes priced over $1 million rising 20% from the prior year. In contrast, sales of homes under $100,000 increased by just under 3%.
First-time buyers, benefiting from lower borrowing costs, are re-entering the market, accounting for 30% of sales in September, up from 26% a year earlier. All-cash transactions made up 30% of sales. However, homes are taking longer to sell, sitting on the market for an average of 33 days, compared to 28 days a year ago.
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