US existing home sales unexpectedly increased in September as rising housing inventory gave buyers more options. However, higher mortgage rates continued to weigh on demand, raising concerns about the strength of the US housing market.
According to the National Association of Realtors (NAR), existing home sales climbed 1.5% to a seasonally adjusted annual rate of 3.99 million units.
The result exceeded economists’ expectations. Analysts surveyed by Reuters had predicted a decline to 3.95 million units. Despite the monthly improvement, home sales remained 2.2% below their September level a year earlier.
Higher Mortgage Rates Weigh on US Housing Market
Although September brought a modest recovery, overall housing market activity remained weak.
NAR chief economist Lawrence Yun highlighted that August and September recorded the year’s lowest home sales levels. He also warned that recent increases in mortgage rates have made it harder for potential buyers to qualify for home loans.
Mortgage borrowing costs have risen steadily since the US-Israeli conflict with Iran began in late February. The conflict has intensified inflation concerns and pushed US Treasury yields higher, directly affecting mortgage financing costs.
According to Freddie Mac, the average 30-year fixed mortgage rate increased to 7.40% last week, reaching its highest level since November 2023.
This marked another increase from the previous week’s 7.28%. Since late February, the benchmark mortgage rate has jumped by 142 basis points.
Higher borrowing costs continue to create affordability challenges, particularly for first-time homebuyers.
Housing Inventory Reaches Highest Level Since 2019
The latest housing data revealed mixed regional trends across the United States.
Existing home sales increased in the South and West, while the Northeast experienced a decline. Meanwhile, sales activity in the Midwest remained unchanged.
On the supply side, existing housing inventory rose 1.9% to 1.60 million properties, reaching its highest level since November 2019.
Available housing supply was also 4.6% higher than a year earlier, offering prospective buyers a wider selection of properties.
At September’s sales pace, the available inventory would take approximately 4.8 months to sell. This matched August’s figure but exceeded the 4.5 months recorded a year earlier.
The increase in available properties suggests that supply conditions are improving, although elevated financing costs continue to limit demand.
US Home Prices Continue to Rise Despite Weak Demand
Despite subdued sales activity, US home prices maintained their upward trajectory.
The median existing home price reached $417,500 in September, representing a 1.3% increase from the previous year. This was the highest median price ever recorded for September.
First-time homebuyers accounted for 31% of total transactions, compared with 30% in August and the same month last year.
However, this participation rate remained below the 40% level considered necessary for a healthy and sustainable housing market.
Properties also spent more time on the market. The median listing period increased to 33 days from 31 days in August, although it remained unchanged compared with September of the previous year.
Distressed property transactions, including foreclosures, represented just 2% of total sales, unchanged from the previous month.
Meanwhile, cash purchases accounted for 27% of transactions, matching August’s share but declining from 30% a year earlier.
Investors Increase Their Share of Home Purchases
Investment activity strengthened during September, even as higher mortgage rates discouraged some traditional buyers.
Individual investors and second-home purchasers represented 20% of existing home sales, up from 15% in both August and September of the previous year.
The increase suggests that investors and buyers purchasing additional properties are taking a larger share of housing transactions.
Looking ahead, the outlook for US existing home sales will depend heavily on mortgage rate movements, housing affordability, and the availability of properties.
While improving inventory could support future transactions, persistently high borrowing costs may continue to restrain demand and delay a broader housing market recovery.
