Experts weigh in on the unusual trend of rising prices amid falling sales
The existing home sales market experienced another noticeable contraction in September, according to the National Association of REALTORS (NAR).
The total number of existing home sales stumbled by 2.0% from August, settling at a seasonally adjusted annual rate of 3.96 million in September. This figure marks a 15.4% drop year over year.
"Home sales have slowed to their slowest pace in more than a decade, yet existing home prices in September were still almost 3% higher than a year before," said Holden Lewis, home and mortgage expert at NerdWallet. "You don't normally see prices rise at the same time that sales fall."
Lewis attributed this anomaly, where home prices ascend amidst declining sales, to the prevailing shortage of homes available for sale.
"Homeowners resist putting their houses on the market because they don't want to pay today's mortgage rates on their next house," he explained. "Everyone, including first-time buyers and current homeowners, is held back by high rates and high prices."
NAR chief economist Lawrence Yun echoed similar sentiments, highlighting the persistent challenges of limited inventory and low housing affordability.
"As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales," said Yun. "The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains."
Freddie Mac reported that the 30-year fixed-rate mortgage averaged 7.63% as of October 19, a huge jump from 6.94% a year ago.
In terms of housing inventory, there were 1.13 million units available at the end of September, reflecting an 8.1% decrease from the previous year. The median existing-home price for all housing types was $394,300, a 2.8% increase from the prior year, with all four regions recording price hikes.
"For the third straight month, home prices are up from a year ago, confirming the pressing need for more housing supply," Yun said.
The REALTORS confidence index
Data from NAR's report revealed that properties typically stayed on the market for 21 days in September, a slight increase from previous months. Sixty-nine percent of homes sold in September were on the market for less than a month.
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First-time buyers accounted for 27% of sales, down 29% from last year. All-cash sales, often indicative of investor activity, were responsible for 29% of transactions, an increase from 22% the previous year. Individual investors or second-home buyers, who make up many cash sales, purchased 18% of homes in September, up from 16% month over month and 15% year over year.
Distressed sales – foreclosures and short sales – made up 1% of sales in September, unchanged from last month and the previous year.
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