Lower 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. That’s slightly less than analysts had predicted, but it’s the fastest pace in seven months.

Sales were 4.1% higher than in September last year.

Regionally, on an annual basis, sales were strongest in the South and Northeast. Sales through August were strongest in the West and actually fell slightly in the Midwest, the only region to see a monthly decline.

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

“As expected, falling mortgage rates are driving home sales,” said Lawrence Yun, NAR’s chief economist. “Improving housing affordability also contributes to increased sales.”

Inventory continued to yield gains, rising 14% year over year to 1.55 million units at the end of September. This is still historically weak. At the current sales rate, there is a 4.6 month supply of homes for sale. The six-month supply is assumed to be balanced between buyers and sellers.

“Although inventory remains below pre-Covid levels, it matches a five-year high,” Yun added. “Many homeowners are financially comfortable, resulting in very few properties becoming distressed and forced sales. House prices continue to rise in most parts of the country, further contributing to overall household wealth.”

The limited 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, marking the 27th consecutive month of annual increases. Prices are 53% higher than pre-Covid levels.

Selling continues to see the biggest gains at the higher end of the market, likely due to increased supply at these levels. Sales of homes priced over $1 million increased by 20 percent from the previous year, while sales of homes priced under $100,000 increased by just under 3 percent.

First-time homebuyers are likely seeing some gains due to falling mortgage rates. They accounted for 30% of September sales; The previous year this rate was 26%.

Approximately 30 percent of sales were made in cash. Homes are sitting on the market longer (an average of 33 days, compared to 28 days a year ago).