WASHINGTON, Oct 23 (Reuters) – U.S. existing home sales dropped to a 14-year low in September, weighed down by higher mortgage rates and house prices.
The second straight monthly decline in home resales reinforced economists’ views that the slump in residential investment, which includes homebuilding, deepened in the third quarter. The housing market has struggled to rebound after being knocked down by a resurgence in mortgage rates in the spring.
Though supply has improved, entry-level homes remain scarce in most regions of the country, keeping home prices at levels that are unaffordable for most first-time buyers.
“It will take more rate cuts and more options to bring buyers back,” said Jennifer Lee, a senior economist at BMO Capital Markets.
Home sales fell 1.0% last month to a seasonally adjusted annual rate of 3.84 million units, the lowest level since October 2010, the National Association of Realtors said on Wednesday. Economists polled by Reuters had forecast home resales would be unchanged at a rate of 3.86 million units.
Sales likely reflected contracts signed a month or two ago, when mortgage rates were quite elevated.
Home resales, which account for a large portion of U.S. housing sales, decreased 3.5% on a year-on-year basis in September. Sales fell 1.7% in the South, with some of the decline attributed to weakness in Florida following the devastation caused by Hurricane Helene. Sales in the state could remain depressed after it was slammed by Hurricane Milton weeks later.
The Northeast and Midwest also experienced a decrease in sales, but activity increased in the West.
Mortgage rates initially dropped after the Federal Reserve began cutting interest rates last month, but they have risen over the past three weeks as solid economic data, including retail sales and annual revisions to national accounts, forced traders to abandon expectations for another 50-basis-point rate cut next month.
The rate on the popular 30-year fixed mortgage averaged 6.44% last week. Though that was higher than the 6.08% average at the end of September, it was well below the 7.63% a year ago, data from mortgage finance agency Freddie Mac showed.
Signs of potential homebuyers hugging the sidelines in anticipation of even lower borrowing costs were evident in government data last week showing a marginal increase in single-family building permits in September.
See current mortgage rates: The most up-to-date numbers
Stocks on Wall Street traded lower. The dollar rose against a basket of currencies. U.S. Treasury prices fell, with the yield on the benchmark 10-year note hitting a three-month high.
