US existing home sales fall in September

Mae Love
October 21, 2018

Existing home sales languished in September, falling to its lowest level since 2015 as mortgage rates continue to move higher, according to the latest data from the National Association of Realtors (NAR).

"This is the lowest existing home sales level since November 2015", NAR Chief Economist Lawrence Yun said in a statement.

"Hurricane Florence likely depressed the September numbers too", as sales in the South saw the biggest decline, he said in a research note. Sales have declined steadily in the past year amid rapid price increases, higher mortgage rates and a tight supply.

"Housing is no longer a tail wind for the economy, but the headwinds are blowing very gently", said Michelle Meyer, an economist at Bank of America Merrill Lynch, before the report was released. According to the NAHB/Wells Fargo Housing Opportunity Index (HOI), this combination of high prices and interest rates helped to bring down housing affordability thus far this year.

Meanwhile, rising mortgage rates are making homeownership more costly. Sales are now down 4.1 percent from a year ago (5.37 million in September 2017).

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There is a clear shift in the market with another month of rising inventory on a year over year basis, though seasonal factors are leading to a third straight month of declining inventory. Existing home sales are down 4.1% year to date compared with 2017. Home prices are rising at a slower rate and the supply of available houses, while low, is increasing.

Ian Shepherdson of Pantheon Macroeconomics said banks imposing tighter lending standards also contributed to slowing sales, as did the new limits on state and local tax deductions in the U.S. tax measure passed in December.

And with rents also stabilizing in many cities, many would-be buyers may not feel as much pressure to buy a new home. However, this is up from 1.86 million homes available a year ago. Sales dropped the most in the South and the decline in the West left sales there down 12.2 percent from a year earlier.

The highest-priced homes are also reporting slower sales, a shift from earlier this year, when sales slowdowns were concentrated in mid-priced and cheaper homes.

The Columbus Realtors trade association says almost 26 hundred homes were sold in its multi-county region last month, down from more than 32 hundred in August.

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