Existing home sales languished in September, falling to its lowest level since 2015 as mortgage rates continue to move higher, according to the latest data from the National Association of Realtors (NAR).
Notable highlights from NAR’s latest data revealed that contract closings fell from the prior month to a 5.15m annual rate, the median sales price rose 4.2% year-over-year to $258,100 and housing inventory of available properties moved up 1.1% year-over-year to 1.88m.
Meanwhile, the cost for would-be homeowners to finance the purchase of a home or existing homeowners to refinance their current home continues to get more expensive as mortgage rates have edged up 1 percentage point higher in 2018. According to Daniel Silver, an economist at JPMorgan Chase & Co., rising mortgage rates is “likely to weigh on the existing home sales data in upcoming reports over the next several months.”
Housing Affordability Heads Down
Since hitting a peak in January, the housing affordability index has been on a downward trajectory, which could go even lower as the Federal Reserve continues its rate-hiking path, which is expected to run through the end of the year and possibly most of 2019. Just last month, the Fed increased the federal funds rate for a third time this year by 25 basis points, bringing it to 2.25.
The rate hikes have been paired with a marked increase in real estate prices, which have dampened real estate activity. According to the NAHB/Wells Fargo Housing Opportunity Index (HOI), this combination of high prices and interest rates helped to bring down housing affordability thus far this year.