US saw record drop in home sales in September: Redfin

Home sales declined the most on record in September as mortgage rates surged and pushed prospective buyers out of the once-hot housing market, according to a new report.

A report from the real estate company Redfin shows the number of homes sold fell by 25 percent and new listings dropped by 22 percent last month, marking the biggest declines on record in both categories — excluding numbers at the onset of the coronavirus pandemic in April and May 2020.

“The U.S. housing market is at another standstill, but the driving forces are completely different from those that triggered the standstill at the start of the pandemic,” Redfin economics research lead Chen Zhao said in a statement.

“This time, demand is slumping due to surging mortgage rates, but prices are being propped up by inflation and a drop in the number of people putting their homes up for sale,” Zhao added. “Many Americans are staying put because they already relocated and scored a rock-bottom mortgage rate during the pandemic, so they have little incentive to move today.”

Although prices have declined recently, sky-high mortgage rates have pushed monthly payments up by more than 50 percent year over year, according to the report.

The median home price in the U.S. rose by 8 percent year over year in September to $403,797. 

Meanwhile, more than 60,000 purchase agreements were canceled last month, which equals 17 percent of homes that went under contract.

Still, Zhao expects market conditions to worsen before getting better, while the Federal Reserve fights rising inflation.

“With inflation still rampant, the Federal Reserve will likely continue hiking interest rates,” Zhao said. “That means we may not see high mortgage rates—the primary killer of housing demand—decline until early to mid-2023.”

Mortgage rates have more than doubled since last year, reaching a 20-year high last week, according to data released Wednesday by the Mortgage Bankers Association.

The 30-year fixed rate climbed to 6.94 percent in the second week of October, up from 6.81 percent a week earlier.