Home sales continue downward trend as inventory rises, first-time buyers remain sidelined

U.S. existing-home sales declined for another month in September, falling 1.0% to a seasonally adjusted annual rate of 3.84 million units, according to the National Association of Realtors. The latest figures mark a 3.5% decrease from September 2023, highlighting the ongoing challenges in the housing market.

The median existing-home price reached $404,500 in September, representing a 3.0% increase from the previous year, marking the fifteenth consecutive month of year-over-year price appreciation.

"Home sales have been essentially stuck at around a four-million-unit pace for the past 12 months, but factors usually associated with higher home sales are developing," said NAR Chief Economist Lawrence Yun. "There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy. Perhaps, some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election."

Housing inventory showed signs of improvement, rising 1.5% from August to 1.39 million units at the end of September. This represents a 23.0% increase from the previous year's levels. At the current sales pace, unsold inventory sits at a 4.3-month supply, up from 3.4 months recorded in September 2023.

First-time homebuyers continue to face significant hurdles, accounting for just 26% of September sales—matching the all-time low set in August 2024 and November 2021. This demographic's struggle coincides with elevated mortgage rates, which Freddie Mac reported at 6.44% as of October 17, though down from 7.63% a year ago.

Cash buyers maintained a strong presence in the market, representing 30% of transactions in September, up from 26% in August. Individual investors and second-home buyers, who often make cash purchases, accounted for 16% of home sales, down from 19% in the previous month.

"More inventory is certainly good news for home buyers as it gives consumers more properties to view before making a decision," Yun noted. "However, the inventory of distressed properties is minimal because the mortgage delinquency rate remains very low. Distressed property sales accounted for only 2% of all transactions in September."

Properties typically remained on the market for 28 days in September, showing a slowdown from both the previous month's 26 days and last year's 21-day average.

"Moderating home price increases are welcome news for home buyers," Yun added. "With wage growth now outpacing home price appreciation, housing affordability will improve."

The single-family home sector saw a modest decline of 0.6% to a seasonally adjusted annual rate of 3.47 million in September, while the condominium and co-op segment experienced a more substantial drop of 5.1% to 370,000 units.