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Sales of previously owned homes dropped to a 14-year low last month despite lower mortgage rates, as uncertainty over the presidential election casts a shadow on the market.
Total existing-home sales dropped 1% from August, to a seasonally adjusted annual rate of 3.84 million in September, the National Association of Realtors® reported on Wednesday. The September sales figure, which excludes new construction, represented a 3.5% drop from one year ago and was the lowest monthly sales pace since 2010.
Despite falling sales, median home prices continued to rise last month, increasing 3% from September 2023, to $404,500. It marked the 15th consecutive month of year-over-year price increases.
NAR Chief Economist Lawrence Yun said that home sales have remained “essentially stuck” near a 4 million pace for the past 12 months despite the recent development of factors that are usually favorable to buyers.
“There are more inventory choices for consumers, lower mortgage rates than a year ago, and continued job additions to the economy,” said Yun. “Perhaps, some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election.”
With the election less than two weeks away, polling continues to show an incredibly tight race between Vice President Kamala Harris and Donald Trump. Both candidates have proposed measures to benefit homebuyers, with Harris vowing a $25,000 federal down payment subsidy for first-time buyers, and Trump promising to somehow lower mortgage rates. This factor is normally outside of the president’s control.
“Homebuying is clearly a major decision, and we know the country is in a polarized state,” Yun said on a call with journalists. “Maybe people are just waiting to see what the result of the election will be before making a major decision, like homebuying or home-selling decisions.”
Further rate declines fail to materialize
Mortgage rates averaged 6.18% in September, their lowest level in two years, according to Freddie Mac. But further declines following the Federal Reserve’s widely anticipated reduction to its benchmark rate in mid-September have yet to materialize. Rates have ticked up each of the past three weeks.
“While lower mortgage rates are widely anticipated by home shoppers, reality has not played out as expected,” says Realtor.com® Chief Economist Danielle Hale. “A stronger economy marked by higher than expected job gains, a falling unemployment rate, and stickiness in core inflation have reset investor expectations around the pace of monetary normalization.”
Hale says that higher mortgage rates, in an environment when many homeowners have record levels of equity and more favorable rates from older mortgages, have created a “conundrum for the housing market” with far fewer people buying and selling homes.
According to NAR, the supply of unsold existing homes rose by 1.5% from the prior month, to 1.39 million at the end of September. At the current sales pace, that’s the equivalent of 4.3 months of supply, well below the six-month supply that economists say represents a balanced market.
Still, the supply of unsold homes was up 23% from a year earlier, when the market had just 3.4 months worth of existing homes on the market.
“More inventory is certainly good news for homebuyers as it gives consumers more properties to view before making a decision,” Yun said. However, the inventory of distressed properties, which can often create deals for buyers, remains minimal because the mortgage delinquency rate remains very low.
Distressed property sales accounted for only 2% of all transactions in September, according to NAR data.
First-time buyers lose ground in September
First-time buyers were responsible for 26% of sales in September, down from 27% a year earlier and matching the all-time low reached in August 2024 and November 2021, according to NAR.
From 1981 through 2023, first-time buyers averaged a 38% share of all sales, indicating the historic difficulties renters face today when trying to break into the housing market.
Meanwhile, all-cash sales accounted for 30% of transactions in September, up from 26% in August and 29% in September 2023. The increase in cash sales doesn’t appear to be due to individual investors or second-home buyers, who saw their share of home purchases drop to 16% in September, down from 19% in August and 18% a year earlier.
Rather, homeowners with sizable equity stakes appear to be cashing in and using the proceeds to purchase a new home in cash at an increasing pace, highlighting the stark disparities between existing homeowners and first-time buyers struggling to break into the market.
“Affordability is still a real challenge. Even with lower mortgage rates, some prospective homebuyers are still going to be priced out,” says Bright MLS Chief Economist Lisa Sturtevant.
Home sales drop in every region except West
Sales of previously owned homes dropped in every region last month except the West, where they rose 4.1% in September, to an annual rate of 760,000, up 5.6% from a year ago. The median price in the West was $616,400, up 1.7% from September 2023.
The Northeast saw the biggest drop, with sales falling 4.2% from August, to 460,000 annualized, down 6.1% from a year earlier. The median price in the Northeast was $467,100, up 6% from last year.
In the Midwest, existing-home sales declined 2.2% in September, to an annual rate of 900,000, down 5.3% from the prior year. The median price in the Midwest was $306,600, up 5% from a year earlier.
The South saw home sales fall 1.7% from August, to an annual pace of 1.72 million in September, down 5.5% from one year before. The median price in the South was $359,700, up 0.8% from the same month a year ago.
Condo sales continued to fall at a faster pace than those of single-family homes. Sales of existing condos and co-ops dropped 5.1% in September, to a seasonally adjusted annual rate of 370,000 units, down 14% from one year ago. The median existing condo price rose 2.2% from a year ago, to $361,600 in September.
That compares with sales of existing single-family homes, which dropped just 0.6% on the month and 2.3% from a year ago, to 3.47 million annualized in September,