In September, the sales volume of existing homes in the United States dropped by 4% compared to the previous month, reaching the lowest level in nearly 12 years. The real estate market in the United States is experiencing a significant blow due to mortgage interest rates recently soaring above 7%.
According to an analysis report released by the real estate brokerage firm Redfin on Monday, September’s sales volume of existing homes in the United States, adjusted for seasonal factors, plummeted by 4% compared to August, marking the largest month-over-month decline in over three years. The home sales volume in September hit the lowest level since 2014, excluding only the initial months of the COVID-19 pandemic in 2020.
At the same time, the supply of existing homes for sale has surged to the highest level since March 2020.
The main reason for the slow sales of existing homes is the recent surge in borrowing costs. The average interest rate for the most common 30-year fixed-rate mortgage in the United States had risen to over 7% in September, leading to a decline in loan demand and more buyers exiting the real estate market.
Redfin tracks the sales volume of existing homes in 50 major metropolitan areas across the United States. The company’s data shows that the sales volume in these 50 metropolitan areas all declined in September, marking the first occurrence of such a situation since September 2023.
Redfin’s Chief Economist Daryl Fairweather pointed out, “There has been a significant shift in sentiment in the real estate industry. When interest rates rise like this, fewer people can afford to buy a home, which means sales volume is bound to decline.”
Due to the drop in sales volume of existing homes and the increase in supply, the housing prices in the United States in September only rose by 1.3% year-on-year, the smallest increase since February.
According to the report by Redfin, nearly one-fifth of sellers in September reduced their asking prices. However, despite this, due to increasing concerns among buyers about rising mortgage rates, 14.5% of home purchase transactions ultimately fell through, reaching the highest proportion on record for Redfin. As it is currently a buyer’s market, homebuyers have more negotiating leverage.
Although the sales volume of existing homes in all major metropolitan areas nationwide has been impacted by the rise in mortgage rates, the extent of the impact varies across regions. The most severe decline in sales volume is seen in the West Coast region, with Seattle and Southern California experiencing the largest drops, mainly due to the high home prices in those areas, making buyers more susceptible to the impact of rising borrowing costs.