Existing-Home Sales in US Extend Decline to Longest Since 2007

Sales of previously owned US homes fell for an eighth straight month in September, underscoring how soaring mortgage rates are punishing the housing market.

Contract closings declined 1.5% to an annualized pace of 4.71 million last month, the slowest since May 2020, according to data from the National Association of Realtors on Thursday. The figure was in line with the median projection in a Bloomberg survey of economists.

The stretch of monthly declines is the longest since 2007, when a housing market collapse swept the economy into the Great Recession. Home sales this year have deteriorated rapidly as the Federal Reserve kicked off an aggressive campaign to crush inflation with huge interest-rate hikes.

“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.

Mortgage rates now stand at a two-decade high, and applications to purchase or refinance a home have crumbled to levels not seen since 1997.

“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. Even so, that’s the lowest since March.

Separate data out earlier this week showed builders are pulling back as well. Beginning construction of single-family homes dropped to a two-year low, and homebuilder sentiment has fallen every month this year.

The number of homes for sale declined from August to 1.25 million. At the current sales pace it would take 3.2 months to sell all the homes on the market, up from 2.4 months in September 2021. Realtors see anything below five months of supply as indicative of a tight market.

Properties remained on the market for longer in September, and 70% of homes sold were on the market for less than a month, down from 81% in August.

Hurricane Ian

Sales fell in three of four regions, including a 1.9% drop in the South. The Fort Myers and Tampa regions of Florida saw a marked drop in purchases in the aftermath of Hurricane Ian, Yun said. He described the disruption as temporary.

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. Yun noted distressed sales are inching higher, though they remain historically low.