US Existing Home Sales Plummet to 13-Year Low, Raising Concerns Over Mortgage Rates and Supply

Date:

Updated: 8:22 PM, Thu October 19, 2023

US Existing Home Sales Experience Sharp Decline, Raising Concerns Over Mortgage Rates and Supply

In a significant development for the US housing market, existing home sales have plummeted to a 13-year low, igniting concerns about the impact of rising mortgage rates and limited supply. This troubling trend is particularly affecting first-time buyers, who are finding it increasingly difficult to afford homes due to the confluence of surging mortgage rates and a tight housing supply.

According to the National Association of Realtors, existing home sales fell by 2.0% in September, reaching a seasonally adjusted annual rate of 3.96 million units. This represents the lowest level of home sales since October 2010. The data reflects contracts that were signed in August when the 30-year fixed mortgage rate soared above 7%, causing a significant decline in buyer demand.

Economists had predicted a slightly less severe decline, with home sales slipping to a rate of 3.89 million units. Sales dropped by 1.1% in the South and 4.1% in the Midwest, while the Northeast saw a modest increase of 4.2% in home sales. However, the West experienced a substantial decline of 5.3%.

The impact of high mortgage rates and limited inventory has been a persistent challenge throughout the year. Chief Economist Lawrence Yun of the National Association of Realtors highlighted the continued hurdles faced by the housing market, stating, As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales. Higher mortgage rates are really hampering activity.

A separate report from the Mortgage Bankers Association revealed that applications for home purchase loans plummeted to levels not seen since 1995. This decline coincided with the average contract interest rate on a 30-year fixed-rate mortgage reaching 7.70%, the highest since November 2000. The surge in mortgage rates mirrors the increase in the yield on the 10-year Treasury note, which has reached its highest level in over 16 years. The expectation of prolonged higher interest rates from the Federal Reserve in response to the robust economy has contributed to this upward trajectory.

The tight supply of existing homes has exacerbated the difficulties faced by potential buyers, with a year-on-year decrease of 8.1% in the availability of previously owned homes. At the current sales pace, it would take approximately 3.4 months to exhaust the existing inventory, compared to 3.2 months a year ago. A balanced market typically maintains a four-to-seven-month supply.

Despite these challenges, the median price of existing homes continued to rise, marking a 2.8% increase from the previous year to reach a record high of $394,300 for any September. Moreover, properties spent an average of 21 days on the market, compared to 19 days the previous year. Over two-thirds of homes sold in September were on the market for less than a month.

First-time buyers constituted 27% of total sales, showcasing a decrease from 29% in the previous year. All-cash transactions accounted for 29% of sales, a notable increase from 22% a year ago. Distressed sales, including foreclosures, remained constant at 1% of total transactions.

The current state of the US housing market demonstrates the immense challenges facing prospective buyers, with surging mortgage rates and limited supply eroding affordability. As the number of existing home sales reaches a 13-year low, potential buyers will be closely monitoring developments in the mortgage market and hoping for a stabilizing effect on rates.

Frequently Asked Questions (FAQs) Related to the Above News

) What is the current state of existing home sales in the United States? (

) Existing home sales in the United States have reached a 13-year low. (

) What factors have contributed to the decline in existing home sales? (

) The decline in existing home sales can be attributed to soaring mortgage rates and a limited supply of available homes. (

) How much did existing home sales fall by in September? (

) Existing home sales fell by 2.0% in September. (

) What is the current supply of available homes on the market? (

) There are currently 1.13 million previously owned homes on the market, which is an 8.1% decrease from the previous year. (

) How long does it take to exhaust the available inventory at the current sales pace? (

) At the current sales pace, it would take approximately 3.4 months to exhaust the available inventory. (

) What is the median price of existing houses? (

) The median price of existing houses rose by 2.8% from the previous year to $394,300. (

) How long do properties typically spend on the market? (

) Properties spent an average of 21 days on the market in September. (

) What percentage of homes sold in September were on the market for less than a month? (

) 69% of homes sold in September were on the market for less than a month. (

) What percentage of home sales were made by first-time buyers? (

) The share of first-time buyers decreased to 27% from 29% in the previous year. (

) Why are mortgage rates increasing? (

) Mortgage rates are increasing due to expectations of the Federal Reserve keeping interest rates higher for a prolonged period. (

) Are distressed sales a significant factor in the decline of existing home sales? (

) No, distressed sales, including foreclosures, accounted for only 1% of transactions and are not the primary driver of the decline in existing home sales. (

) What is the outlook for home sales in the coming months? (

) Unless there are significant changes, it is expected that home sales will continue to decline in the coming months, putting further strain on the industry.

Please note that the FAQs provided on this page are based on the news article published. While we strive to provide accurate and up-to-date information, it is always recommended to consult relevant authorities or professionals before making any decisions or taking action based on the FAQs or the news article.

Shreya Gupta
Shreya Gupta
Shreya Gupta is an insightful author at The Reportify who dives into the realm of business. With a keen understanding of industry trends, market developments, and entrepreneurship, Shreya brings you the latest news and analysis in the Business She can be reached at shreya@thereportify.com for any inquiries or further information.

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