US Housing Market: Sales Rise, But Affordability Crisis Deepens

In September, the US housing market experienced a surprising 1.5% rise in existing home sales, reaching an annual rate of 3.99 million units. This increase primarily stemmed from a downward revision of August's sales figures and improved housing inventory. Despite this growth, the market remains subdued due to escalating mortgage rates and persistently high home prices.

The median existing home price reached an all-time record for September at $417,500, a 1.3% increase from the previous year. This surge in prices, coupled with 30-year fixed mortgage rates nearing 7.5%—the highest since November 2023—has intensified the affordability crisis for many Americans.

While housing supply saw a modest increase, demand was notably weak, with sales declining 2.2% year-over-year. Economists attribute this to the sharp rise in mortgage rates, which have climbed significantly since late February, fanned by inflation and rising Treasury yields. The Federal Reserve's recent interest rate hikes are also contributing to higher borrowing costs.

Geographically, sales increased in the South and West but decreased in the Northeast and remained flat in the Midwest. The inventory of existing homes rose to 1.60 million units, the highest since November 2019, suggesting homes are staying on the market longer.

First-time buyers represented 31% of sales, an improvement but still below the 40% needed for a robust market. Meanwhile, sales of homes priced above $1 million increased, while lower-priced segments saw sharp declines, highlighting a shortage of starter homes. Individual investors and second-home buyers constituted 20% of transactions, up from previous periods.