Existing home sales — which comprise single-family homes, townhomes, co-ops and condominiums — decreased by 1.5 per cent from August and 23.8 per cent from 2021.
The dip in home sales can be attributed to climbing mortgage rates. The average rate on a 30-year fixed rate mortgage is now approaching 7 per cent, up from 3 per cent at the beginning of the year.
Higher mortgage rates are making it increasingly difficult for prospective homebuyers, who are being priced out of the market.
“Expensive regions of the country are especially feeling the pinch and seeing larger declines in sales,” said NAR chief economist Lawrence Yun.
But sagging home sales have not reflected a fall in costs. The median price for an existing home was $384,000, representing an 8.4 per cent jump from September 2021 — marking the 127th consecutive month of year-over-year increases.
The main reason for the rising cost in housing is that the market is still tight.
“Despite weaker sales, multiple offers are still occurring with more than a quarter of homes selling above list price due to limited inventory,” Mr Yun said.
The housing market appears to have been most affected by the Federal Reserve's interest rate increases. As the US battles record-high inflation, the central bank set its short-term interest rate to 3-3.25 per cent, making borrowing costs — such as mortgages — more expensive.
But the resiliency of the US jobs market and consumer spending show that the Fed may still have to enact robust actions to lower the demand that is resulting in higher prices.