Existing homes are selling at the slowest pace since September 2012, with the exception of a brief drop at the start of the Covid 19 pandemic.
Sales of previously owned homes fell 1.5% in September from August to a seasonally adjusted annual rate of 4.71 million units, according to a monthly survey from the National Association of Realtors.
That marked the eighth straight month of sales declines. Sales were lower by 23.8% year over year.
Sharply higher mortgage rates are causing an abrupt slowdown in the housing market. The average rate on the 30-year fixed home loan is now just over 7%, after starting this year around 3%. That is making an already pricey housing market even less affordable.
Despite the slowdown in sales, inventory continues to drop. There were 1.25 million homes for sales at the end of September, down 0.8% compared with September 2021. At the current sales pace, that represents a 3.2-month supply. Six months is considered a balanced supply.
“Despite weaker sales, multiple offers are still occurring 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 vast contrast with the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today.”
Tight supply continues to put pressure on home prices. The median price of an existing home sold in September was $384,800, an increase of 8.4% from September 2021. Prices climbed at all price points. This makes 127 consecutive months of annual increases.
Prices are cooling, however. September marked the third straight month-to-month price decline, which usually fall this time of this year.
They’re falling harder this year, though, particularly on the lower end of the market, where inventory is much leaner. Homes priced between $100,000 and $250,000 dropped 28.4% from a year ago, while sales of homes priced between $750,000 and $1 million declined 9.5%.
Homes did sit on the market slightly longer in September, an average of 19 days, up from 16 days in August and 17 days in September 2021.
Higher mortgage rates aren’t just spooking potential buyers. They’re keeping sellers on the sidelines as well, which adds to the inventory crunch.
“Homeowners love their 3% mortgage rate, and they don’t want to give that up,” Yun said.