Previously owned home sales fall to an almost 14-year low

U.S. sales of previously owned homes declined to an almost 14-year low in September as prospective buyers waited for a further decline in mortgage rates and more attractive asking prices.

Contract closings decreased 1% from a month earlier to a 3.84 million annualized rate, according to figures released Wednesday from the National Association of Realtors. Economists surveyed by Bloomberg expected a 3.88 million pace, based on the median projection. 

Many buyers and sellers are waiting for home financing costs to fall from their current perch in the mid-6% range. Mortgage rates, which slid to a two-year low in September, have climbed after recent job market and inflation data boosted bets the Federal Reserve will take a more gradual approach to reducing borrowing costs.

The resale market has largely been stuck for the past two years, barely moving much above or below an annualized rate of 4 million homes on a monthly basis. A major factor has been the so-called lock-in effect, or homeowners' reluctance to list their homes and surrender their lower mortgage rate. 

Even with the weaker September sales figures, "factors usually associated with higher home sales are developing," Lawrence Yun, NAR chief economist, said in a statement. "There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy."

Some 1.39 million homes were for sale in September, up 23% from a year earlier, the NAR report showed. The supply of homes still remains below pre-pandemic levels.

At the current sales pace, available inventory would last 4.3 months, the longest in more than four years.

The median sales price rose 3% in September from a year ago to $404,500.

By Region

Around the country, previously owned home sales dropped in three of four regions, including a 1.7% decline in the South to the slowest pace since the start of 2012. Recent hurricanes likely hurt sales along Florida's western coast, Yun said on a call with reporters Wednesday. 

Closings fell 2.2% in the Midwest to a 13-year low, and 4.2% in the Northeast. Sales rose 4.1% in the West, driven by California and Arizona. 

In September, 57% of homes sold were on the market for less than a month, compared with 60% in August, according to the NAR, and 20% sold above the list price. Properties remained on the market for 28 days on average, versus 26 days in the previous month. 

Odeta Kushi, deputy chief economist at title insurance giant First American Financial Corp., said last week in a note that some 12 million renter households could afford a median-priced existing home if mortgage rates fall to 5.8% next year, as some are projecting. 

However, inventory problems could persist since "84 percent of mortgaged homes have a rate below 6%, so the number of sellers that would be financially incentivized to sell would remain limited," she said in the report.   

Existing-home sales account for the majority of the US total and are calculated when a contract closes. On Thursday, the government will release September new-home sales figures, which are based on contract signings.