From Reuters:
U.S. existing home sales dropped to a 14-year low in September, weighed down by higher mortgage rates and house prices.
The second straight monthly decline in home resales reinforced economists’ views that the slump in residential investment, which includes homebuilding, deepened in the third quarter. The housing market has struggled to rebound after being knocked down by a resurgence in mortgage rates in the spring.
Though supply has improved, entry-level homes remain scarce in most regions of the country, keeping home prices at levels that are unaffordable for most first-time buyers.
“It will take more rate cuts and more options to bring buyers back,” said Jennifer Lee, a senior economist at BMO Capital Markets.
Home sales fell 1.0% last month to a seasonally adjusted annual rate of 3.84 million units, the lowest level since October 2010, the National Association of Realtors said on Wednesday. Economists polled by Reuters had forecast home resales would be unchanged at a rate of 3.86 million units.
Sales likely reflected contracts signed a month or two ago, when mortgage rates were quite high. Mortgage rates initially dropped after the Federal Reserve began cutting interest rates last month, but they have risen over the past three weeks as solid economic data, including retail sales and annual revisions to national accounts, forced traders to abandon expectations for another 50-basis-point rate cut next month.
The rate on the popular 30-year fixed mortgage averaged 6.44% last week compared to 6.08% at the end of September, data from mortgage finance agency Freddie Mac showed.
“We expect housing market activity to remain subdued well into 2025,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Tombs noted that the average interest rate on existing mortgages was about 4% compared to the current 6.5% rate for new mortgages.
“As a result, interest payments for most existing homeowners will jump if they move home, creating a huge incentive to stay put,” he said. “Only large Fed policy easing will meaningfully change this calculus.”
Home resales, which account for a large portion of U.S. housing sales, decreased 3.5% on a year-on-year basis in September. Sales fell 1.7% in the South, with some of the decline attributed to weakness in Florida following the devastation caused by Hurricane Helene.
Sales in the state could remain depressed after it was slammed by Hurricane Milton weeks later.
The Northeast and Midwest also experienced a decrease in sales, but activity increased in the West.