Lower Rates and Rising Inventory Boost Market Activity in September
Sales of previously owned homes in the United States rose 1.5% in September compared with August, reaching a seasonally adjusted annual rate of 4.06 million units, according to the National Association of Realtors (NAR). While the figure came in just shy of analysts’ expectations, it represents the highest pace of sales in seven months and a 4.1% increase from the same period last year.
Regionally, the South and Northeast recorded the strongest annual gains, while sales in the West led the month-over-month increase. The Midwest was the only region to post a slight monthly decline. Since the data is based on closings, most of these transactions reflect contracts signed in July and August, when mortgage rates had already begun to ease.
Falling Mortgage Rates Drive Activity
The average rate on a 30-year fixed mortgage started July at 6.67% and has since fallen to 6.17%, according to Mortgage News Daily. This drop in borrowing costs is helping to restore affordability for many buyers.
“As anticipated, falling mortgage rates are lifting home sales,” said Lawrence Yun, NAR’s chief economist. “Improving housing affordability is also contributing to the increase in sales.”
Even with the improvement, affordability remains a challenge as home prices continue to climb. The median home price in September reached $415,200 — a 2.1% rise from a year earlier and the 27th consecutive month of annual price growth. Home values are now 53% higher than before the pandemic.
Inventory Rebounds but Still Tight
Housing inventory rose 14% from a year earlier to 1.55 million units at the end of September, matching a five-year high but still below pre-pandemic levels. At the current pace of sales, this represents a 4.6-month supply — short of the six-month mark considered a balanced market.
“Many homeowners are financially comfortable, resulting in very few distressed properties and forced sales,” Yun noted. “Home prices continue to rise in most parts of the country, further contributing to overall household wealth.”
Despite more listings, tight supply continues to favor sellers. Homes are taking longer to sell, with properties spending an average of 33 days on the market, up from 28 a year ago. About 30% of all transactions were made in cash, reflecting strong demand from investors and affluent buyers.
Luxury Market Leads, First-Time Buyers Gain Ground
High-end homes drove much of September’s activity. Sales of properties priced above $1 million jumped 20% year-over-year, compared with a modest 3% gain for homes under $100,000.
First-time homebuyers also made modest progress, comprising 30% of total sales — up from 26% a year ago. Falling mortgage rates appear to be easing the entry barrier slightly for new buyers after years of record-high prices and rate volatility.
While the market remains far from pre-pandemic norms, September’s rebound signals a potential turning point. With mortgage rates at their lowest in months and inventory slowly improving, economists expect continued momentum heading into the final quarter of the year.