The numbers: U.S. existing-home sales fell 1.5% to a seasonally adjusted annual rate of 4.71 million in September, the National Association of Realtors said Wednesday.
This is the eighth straight monthly decline, the first since 2007.
The decline was in line with economists forecasts, according to a Wall Street Journal survey.
The last time existing-home sales fell to this level was May 2020.
Outside of the pandemic, the level of sales activity was lowest since September 2012.
Compared with September 2021, home sales were down 23.8%.
Key details: Existing-home prices continue to moderate given the backdrop of higher rates and cautious buyers. The median price for an existing home fell to $384,800 in September from $389,500 in the prior month.
And expect this median price to keep falling through January and February, the NAR said.
The number of homes on the market fell 2.3% to 1.25 million units in September.
Expressed in terms of the months-supply metric, there was a 3.2-month supply of homes for sale in September, same as the previous month. Before the pandemic, a four or five-month supply was more the norm.
Homes remained on the market for 19 days on average, up from 16 days in September. Pre-pandemic, the average time for homes to remain on the market was a month.
Sales of existing homes mostly fell across the country. Aside from the West, where sales were unchanged from September, the rest of the regions saw declines.
But the West has seen large declines on a year-over-basis, compared to the rest of the country, of 31.3% from last September.
All-cash transactions made up 22% of all transactions. About 29% of homes were sold to first-time home buyers, unchanged from the previous month a percent higher than last year.
Big picture: The mortgage rate hike continues to hit the real-estate market, with sales slipping. And we’re already seeing some price declines led by some regions.
Rates are firmly above 7%, and is expected to keep rising as the Federal Reserve attacks high inflation in the country.
That’s causing a surge in borrowing costs, which continue to hurt buyer demand. The average contract rate for a 30-year fixed-rate mortgage is at 6.94%, according to the Mortgage Bankers Association.
Someone who was taking out a $300,000 mortgage last year at 3%, now with higher rates, can only afford a $190,000 mortgage, NAR said — a 37% drop in what they can afford.
Equifax, a credit reporting company, said during its third quarter results that mortgage originations will fall over 60% in the fourth quarter.
Economists believe that the housing market downturn is sending ominous signals to the rest of the economy:
What the realtors said: Lawrence Yun, chief economist at the National Association of Realtors said that existing home sales have further to drop.
“We are not yet at the bottom,” as interest rates are still rising, Yun told reporters.
He said sales could fall to 4.5 million.
Yun added that housing inventory, however, fell from September, meaning that people weren’t selling homes as much, which is hindering prices from coming down further to more affordable levels.
“There will not be a housing market crash because of lack of inventory,” Yun said.
California will see “sizable” price drops of as much as 10%., he said.