Milwaukee, Wisconsin 2021-10-21 12:01:44 –
By ALEX VEIGA
AP Business Writer
Previously occupied US home sales returned to their strongest pace since January in September as mortgage rates rose and motivated buyers to step out of the bystanders.
The US Open said Thursday that existing home sales increased 7% compared to August, reaching a seasonally adjusted annual rate of 6.29 million units. According to FactSet, this was more powerful than economists expected 6.11 million units.
Buyers, who had been postponed in the early days of the pandemic, regained power, resulting in a 2.3% drop in sales compared to September last year, when home purchases surged.
Lawrence Yun, Chief Economist at NAR, said: “This fall season seems to be one of the best fall home sales seasons of 15 years.”
Yun said the fall in mortgage rates in August showed buyers the urgency to close a home deal, which led to a surge in closed deals in September.
According to mortgage buyer Freddie Mac, average 30-year mortgage rates remain close to historically low levels, but have been on the rise since August, with an average weekly rate of 2.77%.
This week’s average interest rate rose to 3.09%, the highest level since April, when it peaked at 3.18%. The average rate a year ago was 2.8%. As mortgage rates rise, the purchasing power of potential homeowners diminishes.
Economists expect mortgage rates to rise by up to 4% next year as the Federal Reserve takes steps to curb rising inflation. Central banks are widely expected to announce a schedule to reduce monthly bond purchases at a policy meeting next month. The purchase of these bonds has helped keep mortgage rates very low for most of the last 18 months.
Median home prices jumped to $ 352,800 last month, up 13.3% from September last year. Price increases continued to weigh on first-time buyers, who accounted for 28% of total sales last month. This is the lowest level since July 2015, NAR said.
Homes purchased in cash increased by 23% in September from the previous month. Individual investors, who account for the majority of cash sales, accounted for 13% of total home sales last month.
Despite the surge in sales last month, there are signs that housing market frenzy has caused median home prices to rise by 20% to 25% annually. According to Yun, real estate on the market rarely receives multiple offers, and buyers are increasingly refusing to waive their right to inspect and appraise their homes.
Still, home inventories on the market remain tight in many countries, which continue to support higher prices.
Inventories of unsold homes at the end of September were 1.27 million units, down 0.8% last month and down 13% year-on-year. According to the NAR, at the current sales pace, supply was 2.4 months, down from 2.7 months in the previous year.
Homes will continue to sell within a few days of being put up for sale. Homes usually remained on the market 17 days before they snapped up last month. It has been stable for the past 6 months. In a market where there is a more even balance between buyers and sellers, homes usually stay in the market for 45 days. Overall, 86% of homes sold last month were on the market within 30 days.
According to Yun, homeowners in financial difficulty are forced to put their homes up for sale as builders continue to build more and the mortgage grace program has ended. It should start improving next year.
“The era of 20% or 25% inventory decline is over,” Yun said. “The decline is small, and by 2022, inventories will increase year-on-year.”