US Home Sales Stay Near Lows as Mortgage Rates Hit a Three-Year High

US Home Sales Stay Near Lows as Mortgage Rates Hit a Three-Year High

Sales ticked up, but the market is still crawling

The National Association of Realtors said on October 13 that existing-home sales rose 1.5% from August to a seasonally adjusted annual rate of 3.99 million units, and fell 2.2% from a year earlier. Economists polled by Reuters had forecast a 3.95 million pace, so the number beat expectations — but August was revised down to a 3.2% decline instead of the previously reported 2.0%. The annual pace has hovered around 4 million since 2023, far below the roughly 5.25 million pre-pandemic norm, and September was the second straight month below the 4 million threshold.

NAR: August and September were the slowest months of the year

"Despite the small monthly gain on a seasonally adjusted basis, August and September marked the two slowest months for home sales this year," said NAR chief economist Lawrence Yun. "Further increases in mortgage rates in recent weeks mean fewer buyers can qualify to purchase a home." Yun was blunter still: the slump "is clearly due to the lack of demand, not due to limited supply," with higher rates the big reason. NAR also noted that lockbox traffic was down 3% from a year ago.

A seventh straight weekly rise to 7.4%

Freddie Mac's survey put the average 30-year fixed rate at 7.40% for the week ending October 8, up from 7.28% the prior week and 6.30% a year ago — the highest since November 16, 2023, when it stood at 7.44%. The Mortgage Bankers Association read the market even higher: 7.49% for the week ending October 2, the seventh consecutive weekly increase, a 19-point jump that brought the three-week gain to roughly half a percentage point, the steepest since early 2023. Total mortgage application volume fell 4.2% that week, the fifth straight weekly decline.

War, oil and inflation pushed long-term yields up

Reuters and the Associated Press trace the surge to the U.S.-Israeli war with Iran that began in late February. Conflict-driven inflation pushed Treasury yields higher, and mortgage rates track those yields. The 30-year rate has climbed 142 basis points since the end of February; it had briefly dipped below 6% before the war started. The Federal Reserve began raising rates again in September, and the MBA expects two more hikes — one in December and one in the first quarter of 2027.

Inventory is back to pre-pandemic levels; buyers are not

Unsold inventory rose 1.9% to 1.60 million units, the highest since November 2019, and was 4.6% higher than a year earlier. At September's pace it would take 4.8 months to clear the stock, unchanged from August and up from 4.5 months a year ago. Yun said higher inventory and longer days on market give buyers improved negotiating power, and that sellers need to be realistic about local conditions, possibly cutting prices or offering incentives. BMO Capital Markets' Priscilla Thiagamoorthy attributed the unexpected monthly gain to delayed closings and improved inventory.

A record median price for any September

The median existing-home price was $417,500, up 1.3% from a year earlier — the highest September on record and the 39th consecutive month of year-over-year gains. Most homes sold fell in the $250,000 to $750,000 range. With the November 3 midterm elections approaching, affordability has moved to the center of the debate.

First-time buyers are stuck at 31%

First-time buyers made up 31% of transactions, up from 30% in August and a year ago, but NAR says a robust market needs 40%. Individual investors or second-home buyers rose to 20% from 15%, and cash purchases accounted for 27%. The households being squeezed out are precisely the ones who need a mortgage.

Monthly payments eat 27% of income

Barron's cited NAR calculations showing that in August, with rates near 6.8% and a $435,000 median single-family price, principal and interest took 27% of household income; the trade group treats 25% or less as affordable. At 7.3% on the $429,100 median home with 20% down, the payment is about $2,353 — some $756, or roughly 47%, above the $1,597 median paid by existing mortgage holders, whose average rate is 3.88%. Barron's calculated prices would need to crash 32% to offset today's rates; NAR research director Nadia Evangelou expects no such correction, with affordability improving gradually through some mix of lower rates, higher incomes and slower price growth.

Brokers and lenders feel it first

At Bankrate's 7.53% national average, the payment on a median-priced home with 20% down is about $2,407. The MBA has cut its 2027 single-family origination forecast by 5% to just under $2 trillion, from $2.1 trillion expected in 2026, because rates stay above 7%. Sellers are already conceding: the share of listings with price cuts was the highest for any September since 2018 and the highest for any month since October 2022.

What comes next

There is little reason to expect rates to fall sharply while inflation has run above the Fed's 2% target for years and bond yields stay elevated, and buyers cannot count on the central bank — it has started hiking again, with officials saying more are needed. Expect sales to stay pinned near the year's lows, prices to grind higher rather than collapse, and the standoff between buyers and sellers to drag on through 2027.