- Home sales rose 1.5% in September, hitting a seven-month high as buyers responded to slightly lower mortgage rates.
- Despite the sales bump, the median home price climbed again to $415,200, a 2.1% increase from last year and 53% higher than pre-pandemic levels.
- Housing inventory saw a 14% annual increase, but the market remains tilted toward sellers with just a 4.6-month supply available.
- First-time homebuyers are making a comeback, now representing 30% of all sales, up from 26% a year ago.
A Glimmer of Hope for Buyers?
A recent dip in mortgage rates breathed new life into the housing market, as sales of previously owned homes rose 1.5% in September from August. According to the National Association of Realtors (NAR), this increase brought sales to a seasonally adjusted, annualized rate of 4.06 million units—the highest pace seen in seven months. On a year-over-year basis, sales were up a robust 4.1%.
Falling Rates Fuel a Sales Bump
The modest sales surge is directly linked to improved affordability from lower borrowing costs. The average rate on a 30-year fixed mortgage, which began July at 6.67%, has since fallen to 6.17%, according to Mortgage News Daily. These sales figures are based on closings, reflecting contracts likely signed in July and August when rates were beginning their descent.
“As anticipated, falling mortgage rates are lifting home sales,” said Lawrence Yun, NAR’s chief economist. “Improving housing affordability is also contributing to the increase in sales.”
Regionally, the sales increase was most pronounced in the West, while the South and Northeast saw strong annual gains. The Midwest was the only region to experience a slight monthly decline.
The Unshakeable Problem: Stubbornly High Prices
While lower rates are luring some buyers back, they are still facing a formidable obstacle: sky-high prices. The optimism from the sales increase is tempered by the harsh reality that homes are more expensive than ever.
Inventory and Price Pressure
The median price for a home sold in September was a staggering $415,200. This marks a 2.1% increase from the previous year and the 27th consecutive month of annual price gains. To put it in perspective, home prices are now 53% higher than they were before the COVID-19 pandemic.
Although housing inventory rose 14% from a year ago to 1.55 million units, supply remains historically lean. The current 4.6-month supply is still well below the six-month level considered a balanced market, giving sellers the upper hand and keeping prices elevated.
“Many homeowners are financially comfortable, resulting in very few distressed properties and forced sales,” Yun explained, highlighting why prices aren’t likely to fall soon. “Home prices continue to rise in most parts of the country.”
Who Is Actually Buying?
The data reveals a market primarily moving at the top end. Sales of homes priced above $1 million surged by 20% compared to last year, while sales of homes under $100,000 rose by just 3%.
However, first-time homebuyers are showing signs of life, likely encouraged by the rate drop. They accounted for 30% of September sales, a notable increase from 26% the year before. Meanwhile, all-cash deals remained a significant part of the market, making up 30% of all transactions.