Rosalind Evans
The United States real estate market has faced a significant downturn, with September home sales dropping to the lowest since the foreclosure crisis in 2010. This dip represents a 2% decrease from August and a 15.4% decline compared to September of the previous year. The National Association of Realtors reports a seasonally adjusted annualized rate of 3.96 million units in September, marking the slowest sales pace in over a decade.
Lawrence Yun, NAR’s chief economist, highlighted the impact of limited inventory and low housing affordability on the real estate market, stating, “As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales. The Federal Reserve cannot keep raising interest rates in light of softening inflation and weakening job gains.” The market faces additional pressure, with the average rate on the 30-year fixed mortgage now at 8%, a significant increase from the 3% rates seen just two years ago. This increase in mortgage rates, coupled with the median home price rising to $394,300, has pushed many first-time buyers out of the market, dropping their sales from the historical average of 40% to just 27%.
Despite the overall downturn, the higher end of the market has remained relatively stable due to increased supply and the ability of wealthier buyers to make cash purchases. All-cash sales have risen to 29% of all transactions in September, a significant increase from the 22% recorded in the same month last year. This shift highlights the changing dynamics of the real estate market as it grapples with the current economic landscape.
Danielle Hale, chief economist for Realtor.com, pointed out the possibility of a further drop in sales in the coming months, saying, “Although affordability is a headwind, the renewed upward energy that followed the Fed’s September projections might have prompted some shoppers to rush to the closing table, lest they face higher mortgage rates and even worse affordability in the months ahead. If so, this could mean a bigger lull in sales activity in the coming months.”
The real estate market faces many challenges, from high mortgage rates to rising home prices, all of which have contributed to the sharp decline in September home sales. The market dynamics have shifted, with a significant increase in all-cash transactions and a decline in first-time buyers. The potential for further drops in sales activity adds a layer of uncertainty to an already struggling market.
