"As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales," Lawrence Yun, chief economist at the realtors’ association, said. "Higher mortgage rates are really hampering activity."
Existing home sales fell 2% in September to a seasonally adjusted annual rate of 3.96 million units, the lowest level since October 2010. The consensus of forecasts by American economists for September sales were 3.89 million units.
Soaring interest and mortgage rates have discouraged first-time home buyers in the United States, who typically form the core of the demand circle for housing in the country.
US mortgage rates for housing loans neared 23-year highs at the end of September, Freddie Mac, the federal agency responsible for assisting Americans with home buying, said.
The 30-year fixed-rate mortgage hit 7.31%, a peak since 2000, up from 6.65% during this same time in 2022. The 15-year fixed mortgage rate was at 6.72% compared with 5.95% from a year ago.
New home building in the United States rose 7% in September, rebounding from August's sharp drop, though future construction remained dampened by surging interest and mortgage rates, Commerce Department data showed Wednesday.
The surge in mortgage rates came after the Federal Reserve hiked US interest rates by 11 times between March 2022 and August 2023, raising them by 5.25% from a base rate of just 0.25%. The Fed is scheduled to decide on rates again at its next two-day policy meeting ending on November 2.
Housing and real estate play important roles in the US economy, with roughly 65% of occupied housing units being owner-occupied. That makes homes a substantial source of household wealth and home construction a key provider of employment.
In the 2008/09 financial crisis, a crash of the housing market precipitated what later came to be known as the era of the Great Recession. Since then, the US property market has rapidly recovered on the back of economic recovery as well as demand from buyers. Even the 2020/22 coronavirus pandemic only had a fleeting impact on home buying in the United States.
But while supply of homes, both existing and new, have been way below demand the past two years, rising interest rates and record home prices have kept buyers away.