WASHINGTON, Oct 19 (Reuters) - U.S. existing home sales fell to their lowest level in 13 years in September, as rising mortgage rates and a shortage of supply combined to reduce affordability for many first-time homebuyers.
Existing home sales fell 2.0% last month to a seasonally adjusted annual rate of 3.96 million units, the lowest level since October 2010, the National Association of Realtors said Thursday. Economists polled by Reuters had forecast a decline to a rate of 3.89 million units.
They are counted at the close of a contract, and last month's sales likely reflected contracts signed in August, when the rate for the popular 30-year fixed mortgage soared above 7%.
Home resales, which account for a large portion of home sales in the United States, fell 15.4% year-over-year in September.
“As has been the case throughout this year, inventory shortages and low housing affordability continue to hinder sales,” said Lawrence Yun, chief economist at the NAR. “Higher mortgage rates are really putting a damper on activity.”.
The second-hand housing market had shown signs of stabilizing at lower levels.
Sales are likely to plummet further, as a report from the Mortgage Bankers Association on Wednesday shows that applications for home loans fell last week to levels last seen in 1995, while the average contract interest rate on a 30-year fixed-rate mortgage rose 3 basis points to 7.70%, the highest since November 2000.
Mortgage rates have risen in tandem with the 10-year Treasury yield, which reached its highest level in 16 years, largely due to expectations that the Federal Reserve will keep borrowing costs higher for longer in response to the economy's resilience. Since March 2022, the Fed has raised its benchmark overnight interest rate by 525 basis points, to the current range of 5.25% to 5.50%.
Last month there were 1.13 million existing homes on the market, down 8.1% from a year ago. At September's sales rate, it would take 3.4 months to sell the current inventory of existing homes, compared to 3.2 months a year ago.
A supply of four to seven months is considered a healthy balance between supply and demand. The average price of existing homes rose 2.8% year-over-year to $394,300, the highest ever recorded for a September.
