The housing market struggled in September as sales of existing homes dropped to a seasonally-adjusted annual rate of 3.84 million, their lowest rate since October 2010, a 1% decrease from August. This sluggish pace was consistent with economists' expectations, per a survey by Dow Jones Newswires and The Wall Street Journal.
In spite of a surge in listed properties, sales remained weak. In September, there were 1.39 million homes for sale, representing the largest quantity since October 2020, and a 1.5% increase from August. However, these numbers remain under average pre-pandemic levels.
Lower mortgage rates were also ineffective in attracting buyers. In September's first week, the average 30-year fixed mortgage rate was 6.35%, compared to rates exceeding 7% the previous year. Under normal circumstances, these conditions would be conducive to a surge in home sales. Buyers would have been further encouraged by a robust job market, said Lawrence Yun, chief economist at the National Association of Realtors.
Despite favorable conditions such as more inventory choices, lower mortgage rates than the previous year and ongoing job additions to the economy, home sales have been "essentially stuck" at around a 4 million-unit pace for the past year. Some buyers could be wavering on making a substantial financial commitment like buying a house ahead of an uncertain presidential election.
Voters have ample reason to be apprehensive about impending financial obligations, considering the presidential election could have significant impact on the economy and housing policies. The candidates have opposing strategies for addressing the national housing shortage.
Affordability was an additional factor impeding sales. Home prices continued to ascend, however, Yun pointed out that the rise was a little less than the increase in average hourly earning over the same period which suggests homes may be becoming more affordable.
Mortgage rates, after falling in recent months, have begun to rise since the Federal Reserve reduced the influential fed funds rate in September. However, analysts expect mortgage rates to continue declining as the year progresses with the Federal Reserve further reducing the fed funds rate. This downward path could be volatile and meanwhile, many buyers remain unable to enter the market due to high prices.