Existing home sales fell in September, according to the National Association of Realtors. Three of the four major regions in the U.S. recorded a decline in sales while the West saw a rebound in sales. On an annualized basis, sales fell in three regions but grew in the West.
Total sales of existing homes — completed transactions involving individual family homes, contiguous homes, condominiums and cooperatives — fell 1.0% from August to a seasonally adjusted annual rate of 3.84 million in September. On a year-on-year basis, sales fell 3.5% (down from 3.98 million in September 2023).
Lawrence Yeon, chief economist at the National Association of Realtors, said: “Home sales have been stuck essentially at the pace of almost four million units over the past twelve months, but factors typically associated with rising home sales are evolving.” “There are more inventory options for consumers, lower mortgage rates than last year, and continued adding jobs to the economy.” “Some consumers may be reluctant to go ahead with big spending such as buying a house before the next election.”
Total housing inventory recorded at the end of September was 1.39 million units, up 1.5% from August and 23.0% from a year ago (1.13 million). Unsold inventory stands at 4.3 months of supply at the current sales pace, up from 4.2 months in August and 3.4 months in September 2023.
“More inventory is definitely good news for home buyers because it gives consumers more property to see before making a decision,” Yoon said. “However, the inventory of troubled properties is small because the mortgage delinquent rate remains very low. Troubled property sales accounted for only 2% of all transactions in September.”
The average price of existing housing for all types of housing in September was $404,500, up 3.0% from a year ago ($392,700).
How do fluctuations in home-based sales affect consumer confidence?
Fluctuations in existing housing sales can have a significant impact on consumer confidence. Here’s how these changes interact:
1. Economic Health Index
- Positive sales trend: When existing home sales rise, they often signal a strong economy. Consumers may feel more confident in their financial stability, leading to increased spending.
- Negative sales trend: Conversely, a decline in home sales may indicate economic weakness, making consumers more cautious about their financial decisions.
2. Wealth Impact
- Housing property rights: High housing sales can boost property values, and increase property rights for homeowners. This marked increase in wealth can encourage spending on large items, and improve overall consumer confidence.
- Market perception: If home sales are falling, it could lead to fears of falling home values and declining equity, prompting consumers to refrain from spending.
3. Recruitment and job security
- Construction and related jobs: Strong existing housing sales can lead to job growth in the construction, real estate and housing improvement sectors, enhancing job security for many individuals.
- Concerns about job losses: Lower sales may raise concerns about job security in these industries, negatively impacting consumer sentiment.
4. Consumer spending habits
- Increased spending: Higher home sales are often associated with increased consumer spending on home-related goods and services, from furniture to renovations. This rise can create a positive feedback loop, boosting confidence even more.
- Cautious spending: Lower sales may lead consumers to adopt a more cautious approach to spending, affecting the retail and services sectors.
5. Psychological factors
- Market sentiment: Consumers are affected by public sentiment in the housing market. Positive news about home sales can create optimism, while negative reports can reinforce anxiety.
What relationship do you see between existing home sales and interest rates?
The relationship between existing housing sales and interest rates is complex and can significantly affect the housing market and the wider economy. Here are some key points that illustrate this relationship:
1. The impact of interest rates on housing sales
- Low interest rates: When interest rates are low, mortgage rates tend to fall, making borrowing cheaper. This can stimulate demand for housing, leading to increased sales of existing homes where more buyers can buy property.
- Higher interest rates: Conversely, when interest rates rise, mortgage rates rise, which can discourage housing demand. Higher borrowing costs may lead to fewer buyers entering the market, leading to lower sales of existing homes.
2. Consumer affordability
- Monthly payments: Changes in interest rates directly affect monthly mortgage payments. Lower prices can make housing more expensive, attracting first-time buyers and those looking to upgrade or invest.
- Budget constraints: High prices can stretch buyers’ budgets, prompting them to reconsider buying a home or opting for less expensive properties, which can reduce overall sales volume.
3. Refinancing activity
- Refinancing incentives: Low interest rates often encourage homeowners to refinance their existing mortgage, freeing up cash to spend or invest. This can indirectly support the housing market by boosting consumer confidence and spending.
- Low refinancing: When prices are high, refinancing activity usually decreases, which can lead to reduced market liquidity and lower consumer spending.
4. Market sentiment
- Future price forecasts: If consumers expect interest rates to rise, they may rush to buy homes before prices increase further, temporarily boosting existing home sales. Conversely, if prices are expected to fall
