WASHINGTON – US home sales fell for the sixth straight month of September, a sign that housing has increasingly become a weak spot for the economy.
The National Association of Realtors said yesterday that sales were 3.4 percent last month, the biggest drop in 2 ½ years, to a seasonally adjusted annual rate of 5.15 million. This is the lowest sales step since November 2015.
Hurricane Florence dragged sales down in North Carolina, but even without the impact of the storm, sales would have dropped more than 2 percent, according to the NAR. Having reached its highest level in a decade last year, existing home sales in 2018 have steadily declined due to rapid price increases, higher mortgage rates and a scarce supply of available homes.
Nevertheless, analysts are optimistic for the general economy. After a strong jump of 4.2 percent in the second quarter, projected growth in the July-September quarter will reach 3 percent annually.
"Housing is no longer a recession, but the headwind is very gentle," said Michelle Meyer, an economist with Bank of America Merrill Lynch, before the report was released.
Housing is likely to weaken further over the coming months. The weakness in September came before mortgage rates rose further to their highest level in seven months this month. Sales fell 4.1
"Undoubtedly, there is a significant shift in the market," said Lawrence Yun, chief economist of the National Association of Realtors.
A sign of displacement is the demand for existing homes slowing down. Housing prices are rising more slowly, and the supply of available houses is increasing, but it is rising. Buyer traffic has also declined, Yun said.
And with rents also stabilizing in many cities, many potential buyers may not feel the pressure to buy a new home.
"Renting itself can be considered better Rising mortgage rates, still rising home prices, and sluggish wage growth weigh on the affordability advantage of a typical mortgage," said Aaron Terrazas, chief economist at real estate data provider Zillow.
Even the most expensive homes report slower sales, a shift from earlier this year as sales slowdowns were concentrated in midpriced and cheaper homes. Houses priced at $ 1 million or higher dropped sales by 2 percent year-over-year.
Higher credit costs make homes less affordable. The average interest rate for a 30-year fixed-rate mortgage declined this week, but remained close to a high of seven years at 4.85 percent. A year ago, it was 3.88 percent.
There is also evidence that homeowners are increasingly reluctant to sell as mortgage rates rise. That's because many have rates below 4 percent, so selling a home and buying a new one would require them to accept a higher rate.
The Realtors surveyed consumers and found that 16 percent are unwilling to give up their mortgage payments and buy a new home. That's a typical value of 10 percent.