Sales of previously owned homes fell to their lowest level in 14 years last month, despite easing mortgage rates. Concerns over the upcoming presidential election appear to be weighing on the market.
In September, total existing-home sales declined by 1% from August, reaching a seasonally adjusted annual rate of 3.84 million, according to the National Association of Realtors (NAR).
This figure represents a 3.5% drop compared to the previous year, marking the slowest sales pace since 2010.
Despite the drop in sales, home prices continued to rise, with the median price climbing 3% from September 2023 to $404,500. This marks the 15th consecutive month of year-over-year price increases.
NAR’s Chief Economist Lawrence Yun noted that home sales have remained “essentially stuck” around the 4 million mark over the past year, despite typically favorable conditions for buyers.
“There are more options available for buyers, mortgage rates are lower than a year ago, and the economy continues to add jobs,” Yun said. “Still, it seems many are holding back from major purchases like homes until after the election.”
“Homebuying is a significant decision, and the country’s current polarized state may cause potential buyers to wait until after the election to make such commitments,” Yun said in a recent briefing.
Mortgage Rates and Market Tensions
Mortgage rates averaged 6.18% in September, the lowest in two years, as reported by Freddie Mac. However, further declines have not materialized, with rates inching up in recent weeks despite the Federal Reserve’s anticipated rate cut in mid-September.
Mortgage rates averaged 6.18% in September, the lowest in two years, as reported by Freddie Mac. However, further declines have not materialized, with rates inching up in recent weeks despite the Federal Reserve’s anticipated rate cut in mid-September.
“The expectation for lower rates hasn’t matched reality,” said Danielle Hale, Chief Economist at Realtor.com. A stronger-than-expected economy, with solid job growth and persistent core inflation, has impacted investor expectations around monetary easing.
Hale added that higher mortgage rates, combined with record levels of homeowner equity and favorable older mortgage rates, have created a challenging environment for both buyers and sellers.
NAR reports that the inventory of unsold homes rose by 1.5% from August, reaching 1.39 million units at the end of September, representing 4.3 months of supply at the current sales pace.
This remains below the six-month threshold for a balanced market but is an improvement from the previous year’s 3.4 months.
“More inventory is a positive sign for buyers, offering more choices,” Yun said, although distressed property listings remain minimal due to low mortgage delinquency rates. Distressed sales accounted for just 2% of September transactions.
First-Time Buyers Face Challenges
First-time buyers made up 26% of sales in September, down from 27% a year ago, equaling the record lows seen in August 2024 and November 2021.
First-time buyers made up 26% of sales in September, down from 27% a year ago, equaling the record lows seen in August 2024 and November 2021.
This highlights the difficulties many face in entering the housing market, with first-time buyer participation down from a historical average of 38%.
Meanwhile, all-cash transactions increased to 30% in September, compared to 26% in August and 29% a year ago. The rise appears to be driven by homeowners using their home equity to make cash purchases, while individual investors and second-home buyers saw their market share decline.
“Affordability remains a significant hurdle. Lower mortgage rates alone may not be enough to help many prospective buyers,” said Lisa Sturtevant, Chief Economist at Bright MLS.
Regional Variations
Home sales declined across all regions except the West, where they rose 4.1% in September, reaching an annual rate of 760,000, up 5.6% from last year. The median price in the West rose by 1.7% to $616,400.
Home sales declined across all regions except the West, where they rose 4.1% in September, reaching an annual rate of 760,000, up 5.6% from last year. The median price in the West rose by 1.7% to $616,400.
The Northeast experienced the largest drop, with a 4.2% decline from August, down 6.1% from a year earlier. Median prices in the region rose 6% to $467,100. In the Midwest, sales fell 2.2%, and in the South, they dropped 1.7%.
Condo sales continue to be hit harder than single-family homes, falling 5.1% in September, down 14% year-over-year, while single-family home sales declined just 0.6% month-over-month and 2.3% year-over-year.
Market Outlook
The housing market remains in a delicate balance. Although inventory is increasing and mortgage rates have softened, the combination hasn’t been enough to boost sales.
The housing market remains in a delicate balance. Although inventory is increasing and mortgage rates have softened, the combination hasn’t been enough to boost sales.
Economists remain cautiously optimistic, expecting mortgage rates to stabilize and inventory improvements to drive a slight uptick in activity by year’s end. However, much depends on the economic environment and the outcome of the upcoming election.
“More homes for sale and potentially lower mortgage rates should encourage more activity in the fourth quarter,” said Sturtevant. However, potential downside risks, such as persistently high mortgage rates or a disruptive election, could temper the expected recovery.
Prices have continued to rise, hitting a median of $404,500 in September, despite declining sales.
This 3% year-over-year increase marks the 15th straight month of gains, though price growth has slowed to the point where wages are now outpacing home price appreciation, a hopeful sign for affordability improvements in the future.