U.S. existing home sales in September fell by 1% month-on-month and 3.5% year-on-year to 3.84 million units, near a 14-year low, according to data released by the National Association of Realtors (NAR).

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The existing home inventory increased by 1.5% in September to 1.39 million units, representing a 23% rise compared to last year’s 1.13 million units. The months of supply climbed to 4.3 months, up 0.1 from August.

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The median price for existing homes was $404,500 in September, up 3.0% year-on-year and a slight 0.5% increase from the previous period.

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“factors usually associated with higher home sales are developing,” said NAR Chief Economist Lawrence Yun. “There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy. Perhaps, some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election.”

High Interest Rates Continue to Restrain Real Estate Market Activity…

In the past two years, annualized existing home sales have typically ranged from 4 million to 4.5 million units. One major reason is that many homeowners are unwilling to sell properties they bought at lower interest rates during the pandemic.

While the Federal Reserve cut interest rates by 50 basis points in September due to concerns over the labor market, bringing mortgage rates down to a near two-year low, recent improvements in labor market data may lead the Fed to take a more gradual approach to future rate cuts. This may cause mortgage rates to increase again in October, which could further suppress existing home sales.

(Source: MCC, TrendForce)

Given the high home prices and limited supply, many prospective buyers are likely to wait for further rate decreases, indicating that the existing home sales market could remain sluggish for some time.