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Sales of existing homes dropped in September as mortgage rates continued their climb to 20-year highs.
Home sales fell 2 percent between August and September and retreated 15.4 percent from a year ago, according to data released Thursday by the National Association of Realtors. Sales landed at a seasonally adjusted annual rate of 3.96 million.
“As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” NAR Chief Economist Lawrence Yun said in a statement. “The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains.”
The 30-year fixed mortgage rate averaged 7.57 percent as of Oct. 12, according to Freddie Mac, up from 7.49 percent the previous week and 6.92 percent one year ago.
Total housing inventory registered at the end of September was 1.13 million, up from 2.7 percent in August but down 8.1 percent from a year ago, according to NAR. The steep rise in mortgage rates has created a “lock in” effect wherein would-be homesellers are reluctant to list their homes and lose their lower mortgage rates, resulting in a dire shortage of homes for sale.
“Home sales have slowed to their slowest pace in more than a decade, yet existing home prices in September were still almost 3 percent higher than a year before. You don’t normally see prices rise at the same time that sales fall,” said Holden Lewis, a home and mortgage expert at NerdWallet. “We’re seeing it now because there’s a shortage of homes for sale.”
The median existing-home price for all housing types in September was $394,300, an increase of 2.8 percent from a year earlier, according to NAR.
Home sales in the Northeast rose 4.2 percent in September and fell 16.7 percent from a year ago. Sales in the Midwest fell 4.1 percent from the previous month and were down 18.4 percent from a year ago. The South saw sales fall 1.1 percent from August and 11.7 percent from a year ago, while existing home sales in the West fell 5.3 percent from the previous month and were down 19.3 percent from one year ago.
“The Northeast posted the strongest price gain resulting from higher demand coupled with inventory falling by 20 percent,” Yun said. “The West experienced softer price growth reflecting a pause after years of unsustainable and rapid price increases, especially in the Rocky Mountain region.”
