After two months of gains, sales of existing houses fell in September. The issue, however, is not that people are not interested in buying. The problem is that the demand is too high for the low supply of existing houses, and the houses that are for sale have large price tags due to rising prices that have increased 6% annually, according to the National Association of Realtors.
“Much of the sales boost this summer can be chalked up to interest rates dragging along the bottom this year, which enticed more would-be buyers into the market,” said Matthew Speakman, chief economist at Zillow. “Now, sales are coming back to earth, largely because of an ongoing shortage of inventory. There simply are not enough lower-priced homes to keep the market humming. While builders are putting up more homes, their pace is not keeping up with what buyers demand.”
Realtors say there is plenty of demand, which they measure by the number of times their lock boxes are opened. Lock boxes, which allow entry to homes when the owner is away, can now be monitored electronically. Buyer traffic through homes is actually rising, but the traffic is not translating into higher sales.
Builders are increasing production very slowly but mostly in the move-up market. PulteGroup reported higher sales and new orders in its third quarter. It’s CEO pointed squarely to lower mortgage rates improving affordability.
The number of homes for sale at the end of September was nearly 3% lower than September of last year. That makes four straight months of annual declines.
