US Existing Home Sales Decline to Lowest Level Since 2010

In September, existing home sales in the US fell short of expectations, experiencing a 1.0% month-on-month (MoM) decrease. This was against the anticipated 0.5% MoM increase. Even though August's 2.5% MoM decline was revised to a 2.0% MoM drop, it still resulted in a 3.5% year-on-year (YoY) decline in existing home sales.

Lowest Total Sales SAAR Since 2010

The seasonally adjusted annual rate (SAAR) of total sales fell to 3.84 million, marking the lowest level since 2010. Despite the disappointing figures for September, Lawrence Yun, the chief economist at the National Association of Realtors (NAR), remained optimistic. He stated that factors typically linked to higher home sales are emerging. These include more inventory options for consumers, lower mortgage rates compared to the previous year, and ongoing job additions to the economy.

First-Time Buyers and Inventory

First-time buyers accounted for 26% of purchases, equalling an all-time low. In September, around 1.39 million homes were available for sale, a 23% increase from the previous year. However, the supply of homes still remains below pre-pandemic levels. At the current sales pace, the available inventory would last 4.3 months, the longest duration in over four years.

Median Sales Price and Regional Sales

The median sales price in September rose 3% YoY to $404,500. Around the country, sales of previously owned homes fell in three out of four regions. This included a 1.7% decline in the South, marking the slowest pace since the beginning of 2012. Closings in the Midwest fell by 2.2% to a 13-year low, and by 4.2% in the Northeast. However, sales rose by 4.1% in the West, propelled by California and Arizona.

Mortgage Rates and Inventory Issues

While the short-term may see an improvement in existing home sales due to the lagged impact of declining mortgage rates, mortgage rates have once again sharply increased since the Federal Reserve initiated its rate-cutting cycle. This is not a promising sign for the affordability of the housing market. Inventory issues could continue, as Odeta Kushi, deputy chief economist at First American Financial Corp., noted that 84% of mortgaged homes have a rate below 6%. This implies that the number of sellers who would be financially incentivized to sell would remain limited.

Bottom Line

The slump in existing home sales to the lowest level since 2010 is a significant development in the US housing market. Various factors are at play, including lower mortgage rates, increased inventory, and the percentage of first-time buyers. However, the rise in mortgage rates and potential inventory issues could pose challenges moving forward. What are your thoughts on this development in the housing market? Feel free to share this article with your friends and engage in the discussion. Don't forget to sign up for the Daily Briefing, available every day at 6pm.