Dip in Existing-Home Sales Signals ‘Unbalanced’ Market

October 22, 2019

Home sales remain stubbornly low in the face of ongoing inventory shortages and high buyer demand, says Lawrence Yun, chief economist for the National Association of REALTORS®. Yun says the “unbalanced” housing market is to blame for a decline in existing-home sales in September, with all four major regions of the country posting declines. Even low mortgage rates—which continue to hover near their historic bottom—hasn't stopped home sales from cooling.

Total existing-home sales—completed transactions that include single-family homes, townhomes, condos, and co-ops—dropped 2.2% month over month in September, the National Association of REALTORS® reported Tuesday. Existing-home sales were at a seasonally adjusted annual rate of 5.38 million, which is still up 3.9% from a year ago. “We must continue to beat the drum for more inventory,” Yun says. “Home prices are rising too rapidly because of the housing shortage, and this lack of inventory is preventing home sales growth potential.” Yun has urged for greater new-home construction to meet buyer demand.

NAR existing-home sales snapshot

Here’s a closer look at key housing indicators from NAR’s latest housing report:

  • Home prices: The median existing-home price was $272,100 in September, up 5.9% from a year ago. All four major regions of the U.S. saw home prices rise last month.
  • Inventories: At the end of September, 1.83 million homes were on the market, which represents a 2.7% decrease from 1.88 million a year ago. Unsold inventory is at a 4.1-month supply at the current sales pace, down from 4.4 months a year ago.
  • Days on the market: Forty-nine percent of homes sold in September were on the market for less than a month. The average number of days for properties to stay on the market was 32 in September, which matches the average from a year ago. A six-month supply is generally considered a balanced market.
  • Cash sales: All-cash transactions comprised 17% of sales in September, down from 21% a year ago. Investors tend to make up the bulk of cash sales. They purchased 14% of homes last month, down slightly from 16% a year ago.
  • Distressed sales: Foreclosures and short sales comprised just 2% of sales in September, down from 3% a year ago.
  • Mortgage rates: The 30-year fixed-rate mortgage fell to 3.61% in September, down from 3.62% in August. For comparison, last year, the average commitment rate was 4.54%. “For families on the sidelines thinking about buying a home, current rates are making the climate extremely favorable in markets across the country,” says NAR President John Smaby. “These traditionally low rates make it that much easier to qualify for a mortgage, and they also open up various housing selections to buyers everywhere.”

Regional Breakdown

All four regions of the U.S. saw a month-over-month decrease in existing-home sales in September, led by the Midwest. Here’s how existing-home sales fared across the country in September:

  • Northeast: Existing-home sales dropped 2.8% to an annual rate of 690,000, a 1.5% increase from a year ago. Median price: $301,100, up 5.2% from a year ago.
  • Midwest: Existing-home sales fell 3.1% to an annual rate of 1.27 million, nearly equal to a year ago. Median price: $213,500, up 7.2% from a year ago.
  • South: Existing-home sales decreased 2.1% to an annual rate of 2.28 million last month, up 6% from a year ago. Median price: $237,300, up 6.3% from a year ago.
  • West: Existing-home sales fell 0.9% to an annual rate of 1.14 million in September, up 5.6% from last year. Median price: $403,600, up 4.5% from a year ago.