Home sales keep on sinking.
High prices and elevated mortgage rates are forcing potential buyers to the sidelines of the U.S. housing market, putting home sales on track to hit their lowest levels since 1995, according to the National Association of Realtors data reported by The Wall Street Journal. It’s the second year in a row home sales have hit lows seen three decades ago.
Sales of previously owned homes in the first nine months of the year have fallen below the same period in 2023.
Existing home sales in September fell by 1 percent from August to a seasonally-adjusted annual rate of $3.84 million, the lowest monthly rate since October 2010. The decline exceeded the 0.5 percent economists surveyed by the Journal had expected.
September sales this year were down 3.5 percent from September 2023.
Following the stagnant pace of home sales in 2023, economists and real estate executives had widely expected sales to pick up this year.
But home affordability has remained low, with prices elevated from a lower than normal housing supply. Mortgage rates that have remained elevated throughout most of 2024, even in the weeks after the Federal Reserve lowered interest rates last month.
Rising home insurance costs and a volatile election season are another culprit for potential buyer concerns.
Expectations for rate cuts by the Federal Reserve did cause mortgage rates to fall to 6.08 percent in September, a two-year low. But the timing didn’t match with buyer preferences, with most people opting to buy in the Spring and move between academic school years.
The decreased rate was also short-lived, ticking up for three straight weeks to reach the highest levels since August.
“That trickle up in rates, to right back where we were, just sucked the air out,” Michael Read, owner of Bridgeway Mortgage & Real Estate Services in Morristown, N.J., told the Journal.
Mortgage rates often follow the yield on the 10-year Treasury note, which has stayed above 4 percent. But the gap between mortgage rates and the 10-year has stretched to exceed historical norms, which can drive up borrowing costs.
Lenders often sell mortgages to investors who demand bigger returns, particularly when rates are higher than normal, as mortgages are not as stable as guaranteed government bonds.
Mortgage applications have fallen for four straight weeks.
A drop in mortgage rates at the end of this year or next would ease affordability concerns, but that benefit could be eclipsed if home prices continue to rise.
The national-median existing home price in September was $404,500, a 3 percent increase from the year earlier. While down from a recent high, it still marks the highest median price from any September.
The housing market has been a hot topic in this year’s Presidential election, with both candidates promising to tackle home affordability concerns. Vice President Kamala Harris has published plans to increase the housing supply and assist buyers with down payments. Former President Donald Trump has proposed allowing homes to be built on federal land and cutting regulations.
Buying activity normally slows as the holiday season approaches. Some real-estate agents have expectations that buyers will re-enter the market in early 2025.
“It’s not like all of a sudden people have stopped needing to buy houses,” David Schlichter, a Denver-based real estate agent, told the Journal. “You can only defer for so long.”
For now, buyers who are able to participate in the housing market are benefitting from the drop in sales, facing less competition for available homes and enjoying heightened ability to negotiate terms than in past years. Houses typically sat on the market for nearly a month in September, up from 21 days a year earlier, NAR said.
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The number of houses officially sold or in contract rose by 23 percent in September, but still failed to hit normal levels in many markets in the U.S. Many potential sellers are opting to keep their homes–and the low interest rates they locked in a few years ago — rather than take their chances on a new mortgage with less favorable rates.
At current sales pace, there was a 4.3-month supply of homes on the market at the end of September, which is lower than what is considered a balanced market between buyers and sellers.
— Caroline Handel