Existing Home Sales Slow to a Crawl in September: A Market in Transition
The housing market continues to grapple with shifting dynamics, as evidenced by the latest data from the National Association of Realtors (NAR). September saw existing home sales dip to their slowest pace since October 2010, signaling a potential slowdown after a period of relative stability. While increased inventory offers a glimmer of hope for buyers, persistent price growth and the impact of still-high mortgage rates paint a complex picture of a market struggling to find its equilibrium. This cooling trend presents both challenges and opportunities for those involved in the real estate sector, creating a need for careful analysis and strategic adjustments.
Key Takeaways: A Market in Flux
- Existing home sales slumped: September saw sales fall 1% compared to August, reaching a seasonally adjusted annual rate of 3.84 million units—the slowest pace since October 2010.
- Inventory is rising but remains low: While inventory increased by 1.5% month-over-month to 1.39 million homes, representing a 4.3-month supply, it’s still far from pre-pandemic levels.
- Prices stubbornly high: The median existing-home price remained elevated at $404,500, a 3% year-over-year increase, marking 15 consecutive months of annual price gains.
- Cash is still king: Cash transactions accounted for a significant 30% of September sales, highlighting the continued influence of high-cash buyers in the market.
- First-time homebuyers struggle: Their share of sales hit a new low of 26%, indicating the challenges they face in navigating the current market conditions.
Sales Slowdown: A Deeper Dive into the Numbers
The NAR’s report paints a picture of a market struggling to regain its footing. Existing home sales in September clocked in at an annualized rate of 3.84 million units, marking a 1% decrease from August and a 3.5% year-over-year decline. This figure represents the slowest pace since October 2010, highlighting the significant challenges facing the market.
Lawrence Yun, chief economist for the NAR, noted, “Home sales have been essentially stuck at around a four-million-unit pace for the past 12 months, but factors usually associated with higher home sales are developing.” This observation suggests a cautious optimism, indicating that while current conditions aren’t ideal, underlying trends might point towards a more positive outlook in the future.
Regional Variations
The slowdown wasn’t uniform across all regions. While the West region saw a slight uptick in sales, three out of four regions—the Northeast, Midwest, and South—experienced declines. This geographical disparity underscores the heterogeneous nature of the market, with local conditions playing a significant role in shaping sales trends.
Inventory Levels: A Double-Edged Sword
The September report signaled a small but significant increase in housing inventory. The total number of homes available for sale rose by 1.5% month-over-month, reaching 1.39 million units. This translates to a 4.3-month supply at the current sales pace, a slight improvement from previous months.
While this increased inventory is generally considered positive news for prospective buyers, providing them with more options, it’s crucial to note that inventory remains significantly lower than pre-pandemic levels. This limited supply continues to exert upward pressure on prices, negating some of the positive impact of increased availability.
Distressed Properties and Low Delinquency Rates
Yun emphasized the minimal presence of distressed properties in the market: “More inventory is certainly good news for home buyers as it gives consumers more properties to view before making a decision. However, the inventory of distressed properties is minimal because the mortgage delinquency rate remains very low. Distressed property sales accounted for only 2% of all transactions in September.” This indicates a relatively healthy mortgage market, with fewer homeowners facing foreclosure or distressed sales, limiting the availability of cheaper properties.
Prices: The Unwavering Factor
Despite the slowing sales pace, home prices remain stubbornly high. The median price of an existing home sold in September reached $404,500, representing a 3% year-over-year increase. This marks 15 consecutive months of annual price gains, demonstrating the continuous upward pressure on prices, primarily driven by limited inventory and increased competition among buyers.
Cash Buyers Dominate
The influence of cash buyers played a critical role in shaping the market dynamics. In September, cash transactions accounted for 30% of total sales—a significant jump from the pre-Covid average of around 20%. While this dominance is not entirely new, it further restricts housing supply, impacting the overall rate of sales. Although investors pulled back slightly (to 16% from 19% in August), their presence is still very much felt in the market.
The Lengthening Market Time
The duration of homes on the market is also lengthening, suggesting reduced competition and the possible shift from a seller’s market to a buyer’s market. Homes sat on the market for an average of 28 days in September compared to 21 days a year earlier. This longer dwell time may indicate that buyers have more leverage to negotiate prices.
First-Time Homebuyers: Facing Headwinds
First-time homebuyers continue to face significant challenges in navigating the current market. Their share of September sales dropped to a new low of 26%, matching August’s all-time low. This decline underscores the difficulties they encounter in competing with cash offers and navigating higher mortgage rates and pricing.
Looking Ahead: A Market in Transition
The September data reveals a housing market in transition. While the slowing sales pace might signal a correction from recent highs, it does not necessarily indicate a full-blown crash. The persistent price growth, the continued dominance of cash buyers, and the limited inventory point towards a market that is far from equilibrium. More properties are coming on to the market but not enough to offset the high demand.
The upcoming months will be crucial in determining the trajectory of the market. Mortgage rates, while having declined from their peak, remain relatively high compared to historical norms. The interplay between inventory levels, prices, and buyer sentiment will ultimately shape the housing market’s evolution. Whether the trend we’re witnessing now represents a temporary slowdown or a more significant shift remains to be seen. The coming months are set to be formative, and we can expect to see further adjustments both in home prices and sales volume.
