U.S. Home Sales Drop to 14-Year Low as High Mortgage Rates Keep Buyers on

NAR Chief Economist Lawrence Yun suggested that uncertainty surrounding the upcoming U.S. presidential election on November 5 could also be contributing to buyer hesitancy. Although there’s no concrete evidence that the election is impacting decisions, major financial commitments like home purchases are often deferred during times of political uncertainty.

Housing Inventory and Prices

Despite the weak demand, the housing supply grew by 1.5% to 1.39 million units in September, marking the highest level since October 2020. Inventory is now 23.0% higher than a year ago, offering more choices to consumers. However, prices remain elevated. The median home price rose by 3.0% year-on-year to $404,500, with all U.S. regions experiencing price increases.

At the current sales pace, it would take 4.3 months to clear the existing home inventory, up from 3.4 months a year ago. This inventory level is closer to the four-to-seven-month range considered healthy for balancing supply and demand.

Market Trends

Homes stayed on the market for an average of 28 days in September, longer than the 21 days recorded a year ago. First-time buyers made up just 26% of purchases, a slight decrease from 27% last year, and well below the 40% level considered necessary for a robust housing market. Meanwhile, all-cash sales accounted for 30% of transactions, up slightly from 29% a year earlier, while distressed sales remained minimal at 2%.

Outlook

The housing market remains constrained by high mortgage rates and elevated prices, with prospective buyers staying cautious. While inventory is improving, the increased supply has yet to meaningfully lower prices, keeping a lid on sales. The market outlook remains bearish until mortgage rates show a sustained decline.