(Reuters)—U.S. existing home sales dropped for an eighth straight month in September as surging mortgage rates and still-elevated selling prices push affordability beyond the reach of many prospective buyers.
Existing home sales fell 1.5% to a seasonally adjusted annual rate of 4.71 million units last month, the National Association of Realtors said on Thursday. Outside of the short-lived plunge during the spring of 2020, when the economy was reeling from the first wave of COVID-19, this was the lowest sales level since September 2012.
Economists polled by Reuters had forecast sales would decrease to a rate of 4.70 million units. On a regional basis, sales fell in the Northeast, Midwest, and South and were unchanged in the West.
Home resales, which account for the bulk of U.S. home sales, decreased 23.8% on a year-on-year basis.
The Federal Reserve, staging an aggressive battle with the highest inflation in 40 years, has raised its benchmark overnight interest rate from near zero in March to the current range of 3.00% to 3.25%, the swiftest pace of policy tightening in a generation or more. That rate is likely to end the year in the mid-4% range, based on Fed officials' own projections and recent comments.
The rate-sensitive housing market has taken a pounding as a result, far more so than most other sectors of the economy. In contrast, other sectors of the economy, like the labor market, have shown resilience despite the Fed's attempts to cool demand.
Data this week showed confidence among homebuilders eroding for the 10th straight month in October, and ground-breaking for new single-family home projects tumbled to the lowest level in more than two years in September.
Mortgage rates, which move in tandem with U.S. Treasury yields, have soared even higher. The 30-year fixed mortgage rate averaged 6.94% in the latest week, the highest in 20 years, up from 6.92% in the prior week, according to data from mortgage finance agency Freddie Mac.
Though house price growth has slowed as demand weakened, tight supply is keeping prices elevated. The median existing house price increased 8.4% from a year earlier to $384,800 in September. There were 1.25 million previously owned homes on the market, down 0.8% from a year ago.
At September's sales pace, it would take 3.2 months to exhaust the current inventory of existing homes, up from 2.4 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
Properties typically remained on the market for 19 days last month, up from 16 days in August. First-time buyers accounted for 29% of purchases, unchanged from August. All-cash sales made up 22% of transactions, up from 23% a year ago.
(Reporting by Dan Burns; Editing by Paul Simao)