U.S. Existing-Home Sales Fall 2.2% as 30-Year Mortgage Hits 7.4%

Sales of previously occupied U.S. homes fell 2.2% in September from a year earlier, the National Association of Realtors said Tuesday, as mortgage rates near a three-year high kept buyers on the sidelines.

The monthly picture looked slightly better. Existing home sales rose 1.5% from August to a seasonally adjusted annual rate of 3.99 million units — though part of that gain reflects a downward revision to August's figures. The result just edged past the 3.98 million pace economists were expecting, according to FactSet.

NAR Chief Economist Lawrence Yun didn't mince words: "This is a very tough market out there, especially with mortgage rates rising."

How far below normal is the market?

Well below. Sales have hovered near a 4-million annual pace since 2023, against a historic norm closer to 5.2 million. September marked the second consecutive month below the 4-million line.

Put differently: the market is running roughly 23% below its typical volume, month after month, year after year. The slump dates to 2022, when mortgage rates began climbing from pandemic-era lows. Last year, sales of previously occupied homes were essentially flat, stuck at a 30-year low.

This year's rut traces largely to borrowing costs. Mortgage rates have marched higher since the war between the U.S. and Iran started in late February. Expectations of higher inflation amid surging oil prices have pushed up long-term bond yields — the benchmark lenders use to price home loans.

The average rate on the 30-year mortgage hit 7.4% last week, its highest level in nearly three years. It briefly dipped below 6% before the war started. That climb can add hundreds of dollars a month to a borrower's payment, and it has led many would-be shoppers to shelve their plans entirely.

What about prices?

They keep climbing. The U.S. median sales price rose 1.3% in September from a year earlier to $417,500 — an all-time high for the month of September in data going back to 1999, NAR said. Home prices have now risen on an annual basis for 39 consecutive months.

So buyers face a double squeeze: record September pricing plus the highest financing costs in nearly three years.

What does this change for buyers and sellers?

For buyers who can afford current rates — or pay all cash — the picture is unusually favorable on selection. Properties are sitting on the market longer, and the pool of competing shoppers has thinned.

There were 1.6 million unsold homes at the end of September, NAR said — the highest level of unsold inventory since November 2019. Inventory rose 1.9% from August and climbed 4.6% from September last year. Inventory levels still sit below historical norms, but the direction of travel favors buyers.

That translates to a 4.8-months' supply at the current sales pace. Traditionally, a 4- to 6-month supply counts as a balanced market between buyers and sellers — meaning the market has effectively crossed into neutral territory on inventory, even as prices keep setting records.

For sellers, the math is the reverse: more competition from other listings, fewer qualified buyers, and a longer wait unless the price is right.

The swing factor from here is the mortgage rate. A pullback from 7.4% toward the sub-6% levels seen before February would restore affordability for a chunk of sidelined buyers — and likely tighten that inventory cushion fast.