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Home sales eked out a small gain in September, but the pace is still lower than last year, as affordability weighs on buyers. Signed contracts to buy existing homes rose 0.5 percent from August but were 1 percent lower than September 2017, according to the National Association of Realtors. This is the ninth straight month of annual sales declines.
"This shows that buyers are out there on the sidelines, waiting to jump in once more inventory becomes available and the price is right," said Lawrence Yun, chief economist for the Realtors. "The general condition of the economy is excellent, it simply has not lifted home sales this year. Home prices are still rising, so people who are purchasing are still seeing wealth gains."
Affordability, however, has been weighing on buyers. Mortgage interest rates began to rise at the start of September and are now a full percentage point higher than one year ago. These numbers represent homebuyers who were out shopping and making deals in September, calculating, for the first time, what they could pay based on higher rates.
Regionally, pending home sales in the Northeast fell 0.4 percent for the month and were 2.7 percent below a year ago. In the Midwest, the index rose 1.2 percent monthly but fell 1.1 percent annually. Sales in the South fell 1.4 percent monthly but were 3.3 percent higher than a year ago. The index in the West increased 4.5 percent monthly but dropped 7.4 compared with September 2017. Homes in the West are the most expensive in the nation on average.
Home sales closings have been slowing already for much of this year, due to a critical shortage of homes for sale. Now, more homes are coming on the market, increasing supply, but affordability is the new barrier to entry. The average monthly payment for a buyer getting a mortgage is now 15 percent higher than a year ago, according to Zillow, which factored in higher interest rates and higher home prices.
Sales of newly built homes slid 5.5 percent in September and were 13 percent lower compared with September 2017, according to the U.S. Census, which also measures sales by signed contracts.
Mortgage applications to purchase a home are now flat compared with a year ago.