Existing home sales in the United States declined to their slowest annual pace in nearly 14 years during September, with transactions falling 1% from August to a seasonally adjusted rate of 3.84 million units, the National Association of Realtors reported Wednesday. 

This represents a 3.5% decrease from September 2022 and falls short of economists’ expectations of 3.9 million units. While sales declined in the Northeast, South, and Midwest compared to last year, the West showed an increase.

Despite the sales slowdown, the national median home price continued its upward trend, rising 3% from last year to $404,500. This marks the 15th consecutive month of year-over-year price increases. NAR Chief Economist Lawrence Yun noted that while home prices have grown 49% over the past five years, wages increased only 25% during the same period.

The housing market’s challenges persist even as mortgage rates showed signs of easing. While rates dropped to a two-year low of 6.08% four weeks ago, they have since climbed to 6.44%. The market continues to face inventory constraints, though available homes for sale increased to 1.39 million units at September’s end, up 23% from last year and representing a 4.3-month supply at the current sales pace.

First-time homebuyers continue to struggle, accounting for just 26% of all purchases in September, matching August’s all-time low and falling significantly below the 40% level traditionally seen in a healthy housing market. Meanwhile, cash buyers represented 30% of sales, up from 29% last year.

Properties now spend an average of 28 days on the market before selling, a week longer than last year’s pace. The market has also seen a decrease in bidding wars, with only 20% of homes selling above list price compared to 26% in September 2022.

Looking ahead, Fannie Mae projects mortgage rates to average 6.2% in the fourth quarter of 2023 and decline to 5.7% by the same period next year. “Some home shoppers may be holding out for rates to fall further,” notes Bright MLS Chief Economist Lisa Sturtevant, adding that others might be “taking a wait-and-see approach in the lead-up to the presidential election.”

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