Sales of existing homes in the United States fell to their lowest level in 14 years in September, mainly due to high mortgage interest rates and high housing prices, which led many potential buyers to choose to wait and see.

According to the National Association of Realtors (NAR), pre-existing home sales fell 1.0% in September to a seasonally adjusted annualized sales of 3.84 million units, the lowest level since October 2010.Economists had expected sales to remain at 3.86 million units.

Factors of decline

Sales of existing homes fell 3.5% year-on-year, reflecting the pressure the market faces due to rising mortgage rates.Earlier this year, mortgage interest rates rose sharply.Although interest rates briefly fell back after the Federal Reserve cut interest rates last month, recent strong economic data, especially retail sales growth, have pushed rates higher again.This has left many homebuyers on the sidelines, waiting for lower borrowing costs.

Lawrence Yun, chief economist at NAR, said uncertainty about the upcoming U.S. presidential election on November 5 may also be a factor for buyers to hesitate.Although there is no conclusive evidence that elections directly affect home-buying decisions, major financial commitments such as home-buying are often postponed during times of political uncertainty.

House inventory and prices

Despite weak demand, housing supply rose 1.5% in September to 1.39 million units, the highest level since October 2020.Inventories increased by 23% year-on-year, providing consumers with more choices.However, house prices remain high, with the median house price rising 3.0% year-on-year in September to $404,500, with house prices rising in all U.S. regions.

At the current sales rate, it will take 4.3 months to clear existing inventory of second-hand homes, compared with 3.4 months in the same period last year.This inventory level is close to the 4-to seven-month range where supply and demand are considered balanced.

Market trends

The average time for a home to market in September was 28 days, an increase from 21 days in the same period last year.First-time home buyers account for only 26% of purchases, slightly down from 27% last year and well below the 40% considered healthy market levels.At the same time, the proportion of all-cash transactions rose to 30%, compared with 29% in the same period last year, while distressed sales (such as foreclosed homes) remained at a low level of 2%.

Market prospect

Due to the dual constraints of high mortgage interest rates and high housing prices, home buyers remain cautious.Although inventories have improved, increased supply has not yet significantly lowered house prices, and sales remain sluggish.Unless mortgage interest rates continue to fall, the market outlook will continue to be under pressure.