Home sales fell in September to the lowest rate in 13 years, showing the corner of the economy most weakened by high interest rates remains in decline.

For all of 2023, sales of previously owned homes are on track to be the lowest since at least 2011, because increased rates are weighing on demand. But high rates are also limiting the inventory of homes on the market, because homeowners with low rates are unwilling to sell and move. The small supply is pushing home prices higher in much of the U.S.

Existing home sales, which make up most of the housing market, decreased 2% in September from the prior month to a seasonally adjusted annual rate of 3.96 million, the lowest rate since October 2010, the National Association of Realtors said Thursday. September sales fell 15.4% from a year earlier.

The national median existing-home price rose 2.8% in September from a year earlier to $394,300, NAR said. That was the highest price for any September in data going back to 1999, said Lawrence Yun, NAR’s chief economist. Prices aren’t adjusted for inflation.

“People are priced out,” Yun said. “The story of limited inventory and rising, and rising, [and] rising mortgage rates continue to hinder the home sales market.”

The slowing housing market is one of the most direct results of the Federal Reserve’s efforts to curb inflation and cool the economy by raising its benchmark interest rate to a 22-year high. Fed officials were split in September over whether they would need to raise interest rates again this year, according to meeting minutes released last week.

Economists surveyed by The Wall Street Journal ahead of the release had estimated that sales of previously owned homes fell 3.5% in September from the prior month.

The combination of elevated mortgage rates and high prices is expected to keep home-buying affordability low in the coming months, making it difficult for first-time home buyers to enter the market.

Home-buying activity typically slows after the summer, because families with children don’t want to move during the school year. Cold weather in parts of the country and the holiday season also deter home shoppers.

“We’re approaching the slowest part of the year in terms of home purchases in the fourth quarter, and that’s made more so by the spike in mortgage rates,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. “Activity is pretty slow.”

Mortgage applications fell in the week ended Oct. 13 to their lowest level since 1995, according to the MBA.

Outside of housing, the U.S. economy is showing signs of strength. Many economists estimate growth surged over the summer months due to robust consumer spending. Jobless claims, a proxy for layoffs, fell by 13,000 last week to the lowest level since January, according to the Labor Department, suggesting hiring remains robust.

Nationally, there were 1.13 million homes for sale or under contract at the end of September, up 2.7% from August and down 8.1% from September 2022, NAR said. That was the lowest inventory level for any September in data going back to 1999, Yun said. At the current sales pace, there was a 3.4-month supply of homes on the market at the end of September.

Joshua Drake lost out on a few offers to buy homes this summer in the Charleston, S.C., area to higher bidders.

“There wasn’t much out there,” he said, and prices are high. “People are still being greedy and hoping that they’re going to have this rapid bidding war occur.”

Drake bought a three-bedroom townhome in September. “I’m happy with it,” he said.

Existing-home sales fell the most month-over-month in the West, down 5.3%, and in the Midwest, down 4.1%, NAR said.

The typical home sold in September was on the market for 21 days, up from 19 days a year earlier, NAR said.

Some buyers are finding it easier to negotiate. Tom Palmer of Richmond, Va., put in an offer on a five-bedroom house this spring below the listing price and the seller rejected it. A few months later, he made another offer and the seller was more willing to come to the table. Palmer bought the house in September.

“I think that what happened was, it was the latest rise in mortgage rates,” Palmer said. “They just got weary of not having much attention, and they came back and negotiated.”

The share of first-time buyers in the market was 27% in September, down from 29% a year earlier. About 29% of September existing-home sales were purchased in cash, up from 22% in the same month a year ago, NAR said.

A measure of U.S. home-builder confidence fell in October for the third straight month, the National Association of Home Builders said this week.

Housing starts, a measure of U.S. home-building, rose 7% in September from August, the Commerce Department said this week. Residential permits, which can be a bellwether for future home construction, fell 4.4%.

News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from NAR.

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