Well it shouldn’t necessarily come as a surprise. Sales of previously owned homes fell 1.9% in September from a month earlier, according to the National Association of Realtors, as the summertime spike in mortgage rates pressured activity and housing affordability decreased.
“Affordability has fallen to a five-year low as home price increases easily outpaced income growth,” says Lawrence Yun, the National Association of Realtors’ chief economist. “Expected rising mortgage interest rates will further lower affordability in upcoming months.”
The annual pace of existing home sales slipped to 5.29 million, in line with economists’ expectations. NAR also downwardly revised its August estimate to 5.39 million, meaning activity was closer to a near-four-year high rather than the six-and-a-half-year high initially reported by NAR.
Still, September existing home sales are 10.7% higher than a year ago and activity has remained higher than year-ago levels for a consecutive 27 months now.
Despite the decrease in sales activity, homes continue to trade at prices higher than a year ago. Nationally, the median existing-home price in September was $199,200 — an 11.7% yearly jump. NAR notes that median prices have climbed at double-digit year-over-year rates for 10 straight months now. Higher prices have bitten into affordability levels as well.
The Realtors chalk rising prices up to still-tight inventory levels. Total housing inventory, comprised of single-family homes, condos, townhomes and co-ops, remained unchanged in September with 2.2 million existing homes listed for sale. At the current pace, that represents a 5-month supply; a healthy market is typically comprised of a six-month supply.
Since sales of existing homes can take up to two months to close, September’s report reflects the effects rising mortgage rates and home prices have been having on prospective buyers.