Sales of existing homes rose in September, likely due to a brief decline in mortgage rates

Sales of previously owned homes increased 7% to a seasonally adjusted annualized rate of 6.29 million units in September, according to the National Association of Realtors.

The organization’s chief economist, Lawrence Yun pointed to a brief drop in mortgage interest rates in August for the sales gain. The average rate on the 30-year fixed fell below 3% before rising again more significantly in the last month.

Existing-home sales data is based on closed sales, representing contracts likely signed in July and August.

Sales were 2.3% lower than in September 2020.

First-time buyers made up just 28% of sales, the lowest level since July 2015.

The supply of homes for sale ended September at 1.27 million units, down 13% from a year ago. That represents a 2.4-month supply at the current sales pace.

Low supply continued to push prices higher. The median price of an existing home sold in September was $352,800. That is 13.3% higher than September 2020. The annual gains, while high, are now moderating.

“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,” said Yun.

That median price is heavily influenced by the mix of homes currently selling. Most of the activity is on the higher end of the market, as inventory is weakest at the low end. For example, sales of homes priced between $100,000 and $250,000 were 23% lower year over year, while sales of homes priced above $1 million were 30% higher.

Sales of newly built homes in August, which are counted by signed contracts and so would be comparable to September’s existing sales numbers, were 24% lower year over year. Prices for new homes were up 20% as builders struggle with supply chain issues and higher costs for land, labor and materials.