By Jacob Passy for Realtor.com
Existing-home sales improved in September, as the threat of rising mortgage rates likely compelled some buyers to lock in deals before the window of opportunity closed.
Existing-home sales increased 7% between August and September, hitting a seasonally-adjusted, annual rate of 6.29 million, the National Association of Realtors said Thursday. Compared to a year ago, sales were down 2.3%.
Economists polled by MarketWatch had projected existing-home sales to come in at 6.1 million.
What happened: Inventory dwindled
Rising inventory in previous months allowed for September’s increase in home sales, said Lawrence Yun, chief economist for the National Association of Realtors. But that extra inventory was quickly gobbled up.
Total housing inventory fell 0.8% between August and September, and compared to a year ago was down 13%. As of the end of the month, unsold inventory was at a 2.4-month supply. A 6-month supply is considered to be indicative of a balanced market.
“As mortgage forbearance programs end, and as homebuilders ramp up production—despite the supply-chain material issues—we are likely to see more homes on the market as soon as 2022,” Yun said in the report.
The median price for an existing home was $352,800, up more than 13% from a year ago. On a regional basis, every part of the country saw an increase in sales, led by an 8.6% jump in the South
The big picture: Rising interest rates may serve as an impetus for buyers
Most housing economists expect home sales to moderate in the coming months, returning to a more typical pace for this time of year, especially when compared with last autumn’s feeding frenzy in the real-estate market. But there’s one factor that could nudge some buyers to rush to purchase a property now: Mortgage rates.
“Rising mortgage rates will motivate some buyers on the margin to make purchases ahead of a potentially bigger move in rates as the Fed starts tapering,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a research note.
What they’re saying: Higher prices will lead to ‘FOMO’
“October 2020 marked the peak of home-sales activity in the last 12 months, as the shock of COVID quarantines gave way to a frantic search for housing solutions in the new normal of pandemic social distancing and remote work. The pace of sales has since been moderating, and almost a year later, we’re looking at more typical seasonal cooling this autumn,” said George Ratiu, manager of economic research at Realtor.com.
“Demand is probably finding some support from millennials pulling forward their future buying plans, as record price hikes prod a FOMO reaction,” Michael Gregory, deputy chief economist at BMO Capital Markets, said in a research note, referring to the fear of missing out. “And mortgage rates, despite drifting up, remain historically low.”