Existing-home sales made their biggest leap of the year in September, suggesting that low mortgage rates and cooling home price gains in the months prior brought more homebuyers into the market.
The sale of previously owned homes jumped 7% in September to a seasonally adjusted annual rate of 6,290,000, according to the National Association of Realtors®. Existing-home sales measures completed transactions of single-family homes, townhomes, condos and co-ops.
Many of the transactions completed in September originated in July and August. These months featured interest rates below 3%, slower home price growth, and a year-high 2.6 months supply of inventory. Six months is considered balanced.
Existing single-family home supply 2021
“Some improvement in supply during prior months helped nudge up sales in September,” said Lawrence Yun, NAR’s chief economist. “Housing demand remains strong as buyers likely want to secure a home before mortgage rates increase even further next year.”
The year-over-year median existing home price change continued its cooling trend after reaching a peak of 23.6% in May. The median existing-home sales price in September was up 13.3% from last year, which is the lowest year-over-year increase since December 2020. September also marked 115 consecutive months of year-over-year existing home price gains.
Rising home prices are due largely to an imbalance in supply and demand. This dynamic may start to level out in the coming months as builders increase supply and rising interest rates dampen the appetite for homes.
“As mortgage forbearance programs end, and as homebuilders ramp up production – despite the supply-chain material issues – we are likely to see more homes on the market as soon as 2022,” said Yun.
More inventory can’t come soon enough for first-time homebuyers, who have been sidelined by surging home prices. In September 2020, first-time homebuyers made up 31% of existing home sales. That share was down to 28% in September 2021.
Investor/second-home buyer sales and all-cash sales have picked up the market share ceded by first-time buyers in the last year.
Who is buying existing homes?
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Despite the month-over-month increase, existing-home sales were down 2.3% from September 2020. Every region saw a year-over-year decrease except the South, which saw no change from last year.
The NAR data shows the South also had the largest jump in home prices from last year. The median price for existing homes reached $307,500 in September 2021, up 14.8% from the year prior.
The September existing-home sales report suggests an improvement in homebuying conditions including a slight cooling in home price growth. If home builders continue to increase the housing supply and rising mortgage rates dampen demand, home prices will continue to soften, creating more opportunity for first-time homebuyers.
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