Existing-home sales eased further
Existing home sales eased further in September, dropping 1.0% from an upwardly revised August and 3.5% from a year ago to a pace of 3.84 million, just shy of the 3.85 million low seen last fall. Although home buyers had more just-listed for-sale homes to choose from and increased buying power from falling mortgage rates, consumer reactions were muted. Households may be holding out for more as a record-high share expects to see additional mortgage rate declines over the next 12 months.
The median home sales price climbed 3.0% year over year to $404,500, marking a 6th straight month above $400,000, despite dipping from August as is typical at this time of year.
Regionally, prices rose while sales trends varied
Regionally, prices climbed in all four regions, although prices in the South gained only 0.8% and the West also saw a modest 1.7% increase. Sales dipped from a month ago between 2% and 4% in all regions except the West where sales jumped by 4.1%, pushing the pace up from a year ago while all other regions trailed by 5 to 6%.
A stronger economy pushes rates higher
While lower mortgage rates are widely anticipated by home shoppers, reality has not played out as expected. Freddie Mac data show a 35 basis point uptick in mortgage rates from September 19, with additional gains likely later this week. A stronger economy marked by higher than expected job gains, a falling unemployment rate, and stickiness in core inflation have reset investor expectations around the pace of monetary normalization.
Housing will ultimately benefit from a stronger economy
Economic growth is a plus for housing demand, but higher mortgage rates in an era where current homeowners see record-high equity and a large majority have a cost of funds substantially below today’s market rate have created a conundrum for the housing market. Far fewer people are buying and selling homes. In a unique twist, because supply has generally been constrained alongside buyer demand, the housing market remains surprisingly resilient with rising prices and competitiveness indicators like down payment amounts softening only slightly from recent highs. As home prices remain high, builders have leaned into the opportunity to add much needed home inventory, with starts up among single-family and moderate-density 2-4 unit multi-family homes. This could help to make headway against the intractable decade-long housing shortage, but more is needed which is why housing has become such a focal point among voters and politicians in this year’s election cycle.