While still above pre-pandemic levels, the housing market is showing signs of stabilizing as we move into fall. Rates are creeping up as prices and pending sales steady. Let’s take a look at what we know now.
Existing home sales rebounded in September, up 7% with all areas experiencing month-over-month increases. That said, sales continued to be down versus 2020 for the second month in a row.
“Some improvement in supply during prior months helped nudge up sales in September,” according to NAR chief economist Lawrence Yun. “Housing demand remains strong as buyers likely want to secure a home before mortgage rates increase even further next year.”
Pending home sales dipped 2.3% in September with all regions down month-over-month and year-over-year. Yun attributes that to some buyers waiting for inventory to open up a bit more in the new year.
The median home price nudged down again in September to $352,800 but was still up 13.3% versus 2020 for 115 straight months of year-over-year gains. Analysts note that this is heavily influenced by the mix of homes selling with most activity on the higher end of the market: “For example, sales of homes priced between $100,000 and $250,000 were 23% lower year over year, while sales of homes priced above $1 million were 30% higher.”
The Sunbelt continues to bring the heat with Austin (+33.6%), Las Vegas (+24.6%) and Tampa (+20.8%) posting the highest year-over-year median list price growth in September according to Realtor.com.
Investors continue to compete with potential homebuyers for available inventory—purchasing 13% of homes in September. All-cash purchases represented 23% of transactions, up from 22% in August and 18% a year ago.
The Supply Situation
Housing inventory was down 0.8% in September to 1.27 million units with unsold inventory sitting at a 2.4-month supply. Properties continue to sit on the market for 17 days with 86% sold in less than a month.
Housing starts fell 7.7% for an adjusted annual rate of 1,589,000 as builders continue to struggle with supply chain issues and increased costs for labor, land, and materials.
Mortgage rates crept up to end the month at 3.01% for a 30-year fixed mortgage. Mortgage applications ended the month down 1.1%. Joel Kan, Mortgage Bankers Association VP of economic and industry forecasting, attributes this to the increase in rates.
Increased rates have also dampened the furious pace of bidding wars according to Redfin. September marked a nine-month low with 59% of offers facing competition.
What to Expect
Realtor.com chief economist Danielle Hale believes key factors impacting the housing market moving forward will be how the economy evolves with home construction and income growth factored in.
“Rising home prices will be the norm as long as demand exceeds supply, and with a 5.2 million cumulative home shortage over the last decade and many millennials entering prime homebuying age, the stage is set for that imbalance to continue,” notes Hale.
Alternatively, if rates continue to rise along with home prices, some buyers may hold out, reducing demand and ultimately slowing sales and price appreciation.
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