October 20, 2022
Existing-Home Sales in US Extend Decline to Longest Since 2007
- Contract closings dropped for an eighth month in September
- Homes staying on market longer as mortgage rates increase
In September, US home sales declined for the eighth consecutive month, highlighting the harm that rising mortgage rates are doing to the housing sector.
The National Association of Realtors released data on Thursday showing a 1.5% fall in contract closings, bringing the yearly rate of these transactions to 4.71 million, the lowest level since May 2020. The amount matched the median forecast from an economist study conducted by Bloomberg.
The stretch of monthly declines is the longest since 2007, when a housing market collapse swept the economy into the Great Recession. This year’s home sales have fallen off quickly as a result of the Federal Reserve’s vigorous campaign to fight inflation by sharply raising interest rates.
Source: Bloomberg
“We are not yet at the bottom,” Lawrence Yun, NAR’s chief economist said on a call with reporters. Yun expects the figures to keep deteriorating given the current data is not reflective of where mortgage rates are now.
Applications to buy or refinance a home have plummeted to levels not seen since 1997, and mortgage rates are currently at a two-decade high.
“Despite weaker sales, multiple offers are still occurring with more than a quarter of homes selling above list price due to limited inventory,” Yun said in a statement. “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.”
The median selling price rose 8.4% from a year earlier to $384,800. Still, that marks the lowest level since March.
Additionally, builders are cutting back, according to separate statistics released earlier this week. Single-family home construction starts reached a two-year low, and morale among homebuilders has declined each month this year.
From August to September, there were fewer houses for sale (1.25 million). The time it would take to sell every home on the market at the present rate of sales would increase from 2.4 months in September 2021 to 3.2 months. Realtors consider anything less than five months’ supply to be a sign of a competitive market.
In September, residences stayed on the market for longer, but just 70% of those that were sold had been there for more than a month (down from 81% in August).
Hurricane Ian
Sales decreased in three of the four regions, including the South, where they declined 1.9%. The Fort Myers and Tampa regions of Florida saw a marked drop in purchases in the aftermath of Hurricane Ian.
Sales in the West were unchanged from a month earlier, though down more than 31% from a year ago.
First-time buyers made up 29% of purchases in September, the same share as a month earlier.
Digging Deeper
- Properties remained on the market for an average of 19 days, up from 16 days in August
- Cash sales represented 22% of total sales. Investors, who often purchase with cash and are therefore less sensitive to mortgage rates, made up 15% of the market
- Sales of single-family homes dropped 0.9% from a month earlier, while existing condominium and coop sales fell 5.8%
- Existing-home sales account for about 90% of US housing and are calculated when a contract closes
- New-home sales, which make up the remainder, are based on contract signings, and will be released next week
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