Low mortgage rates push home sales higher in September

Sales of previously owned homes rose 1.5% in September from August to a seasonally adjusted annual rate of 4.06 million units, according to the National Association of Realtors. This is slightly lower than analysts expected, but the highest pace in seven months.

Sales increased by 4.1% compared to September of last year.

Regionally, on a year-over-year basis, sales were strongest in the South and Northeast. As of August, sales were strongest in the West and actually declined slightly in the Midwest, the only region to see a monthly decline.

This number is based on closings, so people likely signed contracts in July and August, when mortgage rates were falling but not as low as they are now. The average 30-year fixed rate started July at 6.67% and is now at 6.17%, according to Mortgage News Daily.

“As expected, lower mortgage rates lead to higher home sales,” said Lawrence Yun, chief economist at NAR. “Improving housing affordability also contributes to increased sales.”

Inventory continued to gain, rising 14% from a year ago to 1.55 million units on sale at the end of September. This is still historically poor. At the current sales rate, there is a 4.6-month supply of homes for sale. The six-month offer is considered balanced between the buyer and the seller.

“Inventory matches a five-year high, although it is still below pre-Covid levels,” Yoon added. “Many homeowners feel comfortable financially, resulting in very few distressed properties and forced sales. Home prices continue to rise in most parts of the country, further contributing to overall household wealth.”

Shortage of supply continues to put pressure on prices. The median price of a home sold in September was $415,200, up 2.1% year-over-year and the 27th straight month of year-over-year gains. Prices are 53% higher than pre-Covid levels.

Sales continue to gain the most at the higher end of the market, likely due to increased supply at those levels. Sales of homes priced over $1 million were up 20% from the previous year, while sales of homes priced under $100,000 were up just under 3%.

First-time homebuyers are seeing some gains, likely due to lower mortgage rates. They accounted for 30% of September sales, up from 26% a year earlier.

About 30% of sales were made in cash. Homes are staying on the market longer, an average of 33 days, compared to 28 days a year ago.