Existing-home sales slump to a near three-year low

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Sales of previously owned homes eased in September to the weakest pace in almost three years, a sign rising prices and mortgage costs are keeping potential buyers on the sidelines, National Association of Realtors data showed Friday.

Contract closings fell from the prior month to a 5.15 million annual rate, the lowest since November 2015 (the estimate was 5.29 million). The median sales price rose 4.2% year-over-year to $258,100. Inventory of available properties edged up 1.1% year-over-year to 1.88 million.

The sixth-straight monthly drop in sales, the longest streak since 2014, underscores what's now a challenging time in the real estate market for buyers. The average mortgage rate for a 30-year fixed term has advanced nearly 1 percentage point this year, compared to a decline in 2017, according to Bloomberg calculations of Bankrate.com data.

Rising prices are also keeping homes unaffordable, particularly for first-time buyers. Those price gains are fueled by demand — homes stayed on the market for only 32 days on average, compared with 34 days a year earlier. There’s also a lack of supply, with inventories ticking up yet remaining tight.

"There is without a doubt a clear shift in the market as evidenced by lower sales and higher inventory," Lawrence Yun, NAR's chief economist, said at a briefing accompanying the release of the report. The shift reflects a cooling in the market from recent highs and Americans digesting the higher cost of a mortgage, he said, adding that the decline in closings was the biggest since early 2016.

At the same time, tax cuts and a tight jobs market — keeping people steadily employed and helping lift wages — should continue buoying some buyers. Yun said that the positive effects have been canceled out by the rising burden of mortgage rates.

Hurricanes may have impacted sales data by curbing home-buying plans and transactions, though the latest storms impacted a small share of deals, NAR said. Florence's mid-September Florida landfall came about a year after Irma battered the state.

The data are also in line with government numbers Wednesday that showed new-home construction fell in September as Florence disrupted activity in the South. Future building also showed signs of weakness with multifamily permits dropping by the most in two years.

Purchases fell in three of four regions, led by a 5.4% slump in the South; Midwest sales were unchanged from the prior month. The decline in sales cut across price categories with the least expensive homes, those under $100,000, slumping 18.3%, while those at more than $1 million cooled by 1.6%, the most in two years. Sales of single-family homes and condominium and co-op units both dropped 3.4% from the prior month.

At the current pace, it would take 4.4 months to sell the homes on the market, compared with 4.3 months a year earlier; the Realtors group considers less than five months’ supply consistent with a tight market. Existing-home sales account for about 90% of the market and are calculated when a contract closes. The remainder of the market is made up by new home sales, which are considered a timelier indicator and are tabulated when contracts get signed.

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Purchase Housing market First time home buyers Housing inventory Mortgage rates Hurricane Florence NAR