Home buyers may finally be finding more inventory options this fall, but they’re still being cautious about entering the real estate market, the National Association of REALTORS® reported Wednesday.
“Home sales have been essentially stuck at around a 4-million-unit pace for the past 12 months, but factors usually associated with higher home sales are developing,” says NAR Chief Economist Lawrence Yun. “There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy. Perhaps, some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election.”
Total existing-home sales—which reflects completed transactions for single-family homes, townhomes, condominiums and co-ops—dropped 1% in September compared to August and are down 3.5% from a year ago, NAR’s latest housing report shows. At September’s seasonally adjusted annual rate of 3.84 million, this is the lowest sales activity for existing homes since October 2010. Meanwhile, the median price for an existing home was $404,500 in September, down from $416,700 in August but still up 3% from a year earlier.
“Moderating home price increases are welcome news for home buyers,” Yun says. “With wage growth now outpacing home price appreciation, housing affordability will improve.”
Until then, first-time home buyers appear to be retreating from the housing market, comprising only 26% of sales in September—one of the lowest readings on record, according to NAR’s report. With mortgage rates in the mid-6% range the last few weeks and high home prices, some buyers who don’t have equity to leverage from another home sale may be priced out.
On the other hand, homeowners who continue to realize the sizable equity gains over recent years may be finding they’re in a better position to trade up—or even pay cash for a home. All-cash sales surged to 30% of home sales in September; all-cash sales also include a large portion of investors and second-home buyers, which comprised 16% of sales in September, NAR reports.
Home seller profits remain historically high, with homeowners earning a 55.6% profit margin—or just under $130,000—on the typical single-family home or condo in the third quarter, according to ATTOM Data Solutions’ 2024 U.S. Home Sales Report.
Inventory Is Finally Rising
More homeowners are testing the market this fall. Housing inventory was up 1.5% from August and 23% compared to a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace, up from the brisk 3.4-month pace a year earlier, NAR reports. Home buyers also may have more time to make a purchase decision: Properties typically remained on the market for 28 days in September, up from 21 days a year ago, according to the latest REALTORS® Confidence Index. Fifty-seven percent of real estate pros report that homes are selling in less than a month, down from nearly 70% a year earlier.
“More inventory is certainly good news for home buyers, as it gives consumers more properties to view before making a decision,” Yun says. “However, the inventory of distressed properties is minimal because the mortgage delinquency rate remains very low. Distressed property sales accounted for only 2% of all transactions in September.”
Buyers may find more inventory in the new-home sector as builders continue to ramp up construction. Single-family housing starts rose nearly 3% in September to a 1.03 million seasonally adjusted annual rate, the Commerce Department reports.
Still, “many prospective home buyers remain on the sideline waiting for lower interest rates,” says Robert Dietz, chief economist of the National Association of Home Builders. To help home buyers with affordability, 62% of builders say they continue to use sales incentives, such as buying down mortgage rates. Also, about one-third of builders—or 32%—reported in September that they would cut their prices in October, with an average price reduction of 6%.
The Market Remains Optimistic
The real estate industry is still largely banking that a pick-up in home sales is on the horizon. NAHB surveys show builder sentiment remains high, and NAHB is forecasting a gradual easing of inflation and for mortgage rates to moderate in the coming months. Also, nearly a quarter of real estate professionals remain hopeful: 21% expect a year-over-year increase in buyer traffic over the next three months, up from just 8% a year ago, according to the REALTORS® Confidence Index. Also, 20% of real estate pros surveyed say they expect a year-over-year increase in seller traffic over that same time period. Plus, homes listed in September received an average of 2.4 offers, which is down slightly from 2.6 offers a year ago but still shows buyer competition is present, according to NAR’s data.
Regional Outlook
Here’s a closer look at how existing-home sales fared across the country in September, according to NAR’s home sales index:
- Midwest: Sales fell 2.2%, reaching an annual rate of 900,000. Sales are down 5.3% from the prior year. Median price: $306,600, up 5% from September 2023.
- South: Sales decreased 1.7% to an annual rate of 1.72 million. Sales are now down 5.5% from the year prior. Median price: $359,700, up 0.8% from one year earlier.
- West: Sales rose 4.1%, reaching an annual rate of 760,000. Sales are up 5.6% from a year ago. Median price: $616,400, up 1.7% from September 2023.
- Northeast: Sales fell 4.2%, settling in at an annual rate of 460,000. That is down 6.1% from September 2023. Median price: $467,100, a 6% jump from last year.