Existing home sales rise as interest rates rise



Sales of previously occupied homes in the United States rebounded in September at their highest pace since January, as concerns about rising mortgage rates prompted buyers to pull out.

Sales of previously occupied homes in the United States rebounded in September to their highest pace since January as mortgage rates rise, prompting buyers to pull out.

The National Association of Realtors said Thursday that sales of existing homes rose 7% from August to a seasonally adjusted annual rate of 6.29 million units. It was stronger than the 6.11 million units economists were expecting, according to FactSet.

Sales were down 2.3% from September last year, at a time when home purchases jumped as buyers who held back during the first months of the pandemic came back with a vengeance.

“The increase in sales over the past month that I would attribute to mortgage rates,” said Lawrence Yun, chief economist for the NAR. “This fall season appears to be one of the best fall home selling seasons in 15 years.”

Yun noted that a drop in mortgage rates in August made buyers urgent to close deals on homes, which resulted in the sharp increase in deals closed in September.

While the average rate on a 30-year mortgage remains near historic lows, it has risen slightly since August, when the weekly rate averaged 2.77%, according to mortgage buyer Freddie Mac. .

This week, the average rate rose to 3.09%, the highest level since April, when it peaked at 3.18%. A year ago, the rate was on average 2.8%. When mortgage rates rise, it reduces the purchasing power of future homeowners.

Economists expect mortgage rates to rise by as much as 4% next year as the Federal Reserve takes action to control rising inflation. The central bank is expected to broadly announce a schedule for reducing its monthly bond purchases at its policy meeting next month. These bond purchases have helped keep mortgage rates extremely low for most of the past 18 months.

The median home price jumped to $ 352,800 last month, a 13.3% increase from September of last year. Rising prices continued to weigh on first-time buyers, who accounted for 28% of all sales last month. This is the lowest level since July 2015, according to the NAR.

Homes bought for cash increased 23% in September from the previous month. Individual investors, who account for many cash sales, accounted for 13% of all home sales last month.

Despite the sharp increase in sales last month, there are signs that the housing market frenzy that has driven 20-25% annual increases in median home prices is easing. Properties on the market are receiving fewer multiple offers and buyers are increasingly refusing to waive their right to a home inspection or appraisal, Yun said.

Still, the inventory of homes on the market remains tight across much of the country, which continues to support price increases.

At the end of September, the stock of unsold homes stood at just 1.27 million homes for sale, down 0.8% from the previous month and 13% from a year ago. At the current pace of sales, that equates to a 2.4-month supply, down from 2.7 months a year ago, the NAR said.

Homes continue to sell for a few days after they go on sale. The homes typically stayed on the market for 17 days before they were bought last month. This has been maintained over the past six months. In a more balanced market between buyers and sellers, homes typically stay on the market for 45 days. In total, 86% of homes sold last month were on the market for less than 30 days.

The inventory of homes for sale is expected to start improving next year, as builders continue to ramp up construction and the end of mortgage forbearance programs force financially troubled homeowners to put their homes up for sale. Yun said.

“With the days of inventory being down 20% or 25%, those days are gone,” Yun said. “The decline is diminishing and soon in 2022 we will start to see inventory increasing year over year.”


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