September Home Sales Dropped To Lowest Level in 14 Years Amid High Mortgage Rates, Lack of Options

US-economy-REAL-ESTATE-indicator — (Photo : Photo by JIM WATSON/AFP via Getty Images) Workers lay a foundation at a new home construction site in Trappe, Maryland, on October 28, 2022. - New home sales in the US dipped in September, official data showed on October 26, 2022, as worsening affordability nudges ownership further out of reach for many. Sales soared during the coronavirus pandemic as Americans snapped up homes on the back of bargain mortgage rates, but the sector has cooled with the US Federal Reserve hiking lending rates as it fights to bring down surging inflation.

Sales of previously owned homes fell by 1% in September compared to August, marking the lowest level recorded since at least October 2010.

The number of home sales in September of this year was also 3.5% lower than in the same month in 2023. Total existing home sales in the US last month were 3.84 million at a seasonally adjusted, annualized rate.

Sales lagged in three of the four major regions in the US. Only the West experienced an improvement in existing home sales, according to the latest update from the National Association of Realtors (NAR).

Existing home sales are counted based on closings, representing contracts likely signed in July and August.

Why Home Sales Lagged

The lagging sales can be attributed to several factors, including a lack of choices for potential buyers and elevated mortgage rates---both of which kept housing affordability low.

The contract rate for the 30-year mortgage term hovered at 6% in September, per data from Freddie Mac.

Inventory rose in September by 1.5% month-to-month, raising the total supply of homes for sale in the US to 1.39 million. That is 23% more than the inventory in September last year. But despite the recent increase, the inventory in the housing market remains low. This lack of options pushes prices higher.

In September, the median sale price of a home was $428,281, Redfin reported. That is 3.9% higher year-over-year.

Home Sales Could Be Due to Election

In the report, NAR chief economist Lawrence Yun attributed the lagging sales to hesitation from buyers to purchase properties due to the upcoming election. said factors often associated with higher sales "are developing."

In most cases, buyers have uncertainties surrounding potential changes in government policies and economic conditions. This is because presidential candidates often have differing approaches to taxes and housing regulations.

Historically, home sales decreased by about 15% in the months leading up to the election. That is compared to a 9.8% decline during non-election years, per a study by Meyer's Research.