Home Sales, Listings Plunge Over 20% in September—Most Since Pandemic’s Outset

Bad-to-worse news continued to plague the housing market this week as Redfin reported that the number of homes sold dropped 25% year over year while new listings fell 22%.

These represented the largest declines since May 2020 and April 2020, respectively, when the onset of the pandemic brought the housing market to a near halt.

Redfin Economics Research Lead Chen Zhao said in prepared remarks that the U.S. housing market is at another standstill.

“This time, demand is slumping due to surging mortgage rates, but prices are being propped up by inflation and a drop in the number of people putting their homes up for sale,” according to Zhao. “Many Americans are staying put because they already relocated and scored a rock-bottom mortgage rate during the pandemic, so they have little incentive to move today.”

Sales declined 23.8% year-over-year compared to September 2021. This was the 13th consecutive month with sales down year-over-year, NAR reported.

Calculated Risk blogger Bill McBride wrote, “Existing home sales are being impacted by higher mortgage rates. Rates have increased sharply in October, and that will impact closed sales in November and December – so I expect further declines in sales later this year.”

Roughly 60,000 deals were called off, equal to 17% of homes that went under contract—the highest share on record aside from March 2020, Redfin added.

Mortgage Rates Could Hit 8.5%

Meanwhile, existing-home sales sagged for the eighth consecutive month and the inventory of unsold existing homes declined for the second straight month, according to National Association of Realtors (NAR).

“The housing sector continues to undergo an adjustment due to the continuous rise in interest rates, which eclipsed 6% for 30-year fixed mortgages in September and are now approaching 7%,” NAR Chief Economist Lawrence Yun said in prepared remarks. “Expensive regions of the country are especially feeling the pinch and seeing larger declines in sales.”

About a week ago, Yun was among housing economists on a panel at a real estate conference.

Then, he suggested that mortgage rates could reach 8.5% over the next few months in another shock to the housing market, should it break through the current 7% point of resistance.

Yun said home sales are expected to be down 15% for the year and he expects no home price appreciation next year, nationally; some markets will experience declines. Midwest home values are unlikely to fall because theirs didn’t have the tremendous run-up last year like that of some coastal and southeast markets.

ARM Applications Surge

There’s also been a surge in consumers taking out adjustable-rate mortgages (ARMs), the Mortgage Bankers Association reported.

Home mortgage applications are now into their fourth straight month of declines, dropping to the lowest level since 1997, as the 30-year fixed mortgage rate hit 6.94 percent – the highest level since 2002, the Mortgage Bankers Association reported Oct. 19.

The ARM share of all applications rose to 12.8 percent, its highest share since March 2008.