Home sales figures released on Thursday offered a sobering mix of news: The number of existing homes sold fell to levels not seen since the aftermath of the Great Recession. At the same time, prices remain stubbornly high despite the highest mortgage rates in 23 years.
The National Association of Realtors reported that sales of existing homes fell by the psychologically significant annual rate of 4 million homes sold in September. The average price rose to $394,300 last month – a 2.8% increase from 2022 but a 3.1% decrease from August.
Also on Thursday, Fed Chairman Jerome Powell told members of the Economic Club of New York Luncheon that no one should expect interest rate cuts in the near future: “Although the road will likely be bumpy and take some time, my colleagues and I agree.” “in our commitment to sustainably reduce inflation to 2%.”
Since 2000, annual home sales have averaged about 5.3 million per month. Only eight other months – all after the 2007-2008 financial crisis – recorded lower sales than September, including July 2010, which fell to a low of 3.45 million.
The number of homes sold has been falling since 2022, when the Fed announced plans to raise interest rates to curb 40 years of high inflation. Since then, mortgage rates have more than doubled, resulting in higher monthly payments for new homeowners.
The decline in the real estate market has not been as pronounced in every region or price segment, but all have seen declines since 2022.
No increase next month? Fed Chair Signals Central Bank May Keep Interest Rates Stable
Where most houses were sold in September
Nearly half of the homes sold in the U.S. in September were sold in the South. Homes selling for $250,000 to $500,000 represented the majority of purchases, but even in that category there were 15.5% fewer sales than last year. Sales of homes between $100,000 and $250,000 fell the most: 23.4% compared to September 2022.
Why home sales continue to decline
Real estate experts have speculated in recent months that some problems have kept prices high and deterred potential buyers. Including:
- Increased prices. September’s average sales price of $394,300 is among the top 10 months since 2000 and is also the only fall month when prices tend to decline.
- Short stocks: Based on the current sales pace, there is 3.4 months of supply of homes on the market. A more balanced domestic market between buyers and sellers would have 4 to 5 months of supply.
- High mortgage interest rates: Homeowners who have benefited from historically low mortgage rates in recent years are not interested in taking on new mortgages that may be more than double their current rates.
Freddie Mac reported Thursday that average 30-year mortgage rates are now at 7.63%, which appeared to deter some first-time buyers in September, according to the NAR report. Cash sales rose to 29% in September from 22% last year, while first-time buyers, the second largest group, fell 2%.
Will interest rates continue to rise?
Powell and other Fed presidents have repeatedly said in their speeches throughout the week that we shouldn’t expect a rate cut any time soon. However, all but 1% of investors betting on the direction of interest rates expect the Fed to keep interest rates stable after its next meeting on November 1, according to the CME FedWatch Tool.
“Inflation is still too high, and a few months of good data is just the beginning of what is needed to build confidence that inflation is moving sustainably toward our target,” Powell said in his prepared statement on Thursday .
Powell said he and other Fed members are aware of the tightrope they are walking: “Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to extract more stubborn inflation from the economy , resulting in high employment costs. We do that too.” A lot of things could also cause unnecessary damage to the economy.”
Contribution: The Associated Press