The housing market in the United States continued to face challenges in September, with existing home sales dropping below the 4 million mark for the first time in over 13 years. This marks the seventh consecutive month of negative sales trends in 2023, as the industry grapples with a variety of factors affecting its performance.
Here’s the lowdown:
1. September Sees a Sharp Decline: In September, the seasonally adjusted annual rate of existing home sales reached a mere 3.96 million, painting a grim picture of the current state of the market.
2. Significant Year-Over-Year Decline: The National Association of Realtors (NAR) reported a 15.4% year-over-year decline in existing home sales, emphasizing the depth of the issue.
3. Shortage of Inventory Persists: The inventory problem, which contributed to the summer sales slump, worsened in September, with the supply of homes decreasing.
4. Home Prices Reflect Market Instability: Home prices also faced fluctuations, dropping from the previous month. The median sale price for existing homes in September was $394,300, down from $407,100 in August, but still reflecting a 2.8% increase compared to the same period in 2022.
5. Mortgage Rates and Affordability: Economists attribute the sales decline primarily to high borrowing rates and low affordability. The combination of these factors has made it difficult for potential buyers to enter the market.
The Ongoing Slump:
The existing home sales report from the National Association of Realtors delivered disappointing news in September, as closed deals slipped 2% from the previous month. This has brought existing home sales below the 4 million mark for the first time since October 2010.
The September decline represents the seventh month of negative movement in existing home sales this year, with only February and May showing improvement from the previous month.
Price and Inventory Dynamics:
In addition to sales figures, home prices experienced fluctuations. The median sale price for existing homes dropped in September, although on an annual basis, prices showed a modest 2.8% improvement compared to the same period in 2022.
Conversely, inventory saw a slight uptick from the previous month but remained down over 8% compared to a year ago.
Culprits for the Sales Slump:
Economists point to persistently high mortgage rates and low housing affordability as the primary reasons behind the recent dip in sales. The NAR’s Chief Economist, Lawrence Yun, emphasized these challenges, asserting that the “Federal Reserve simply cannot keep raising interest rates” given the softening economy.
Nonetheless, there is the possibility of one more rate hike by the Federal Reserve this year, as Chair Jerome Powell hinted in a previous statement.
Potential Implications:
Despite the decline, some experts suggest that sales may have received a temporary boost in September, as potential buyers rushed to secure their purchases before further increases in borrowing costs. This trend could potentially lead to a further slowdown in sales activity in the months ahead.
In conclusion, the housing market in the United States faces ongoing challenges, with existing home sales dipping below 4 million for the first time in over a decade. High mortgage rates and low affordability remain major obstacles, with the market’s future direction uncertain in the face of these persistent headwinds.
