Existing-home sales slump to a near 3-year low as buyers back out

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Prospective buyers look at a home for sale during an open house. According to the National Association of Realtors, sales slumped in September.

The numbers: Existing-home sales ran at a seasonally adjusted annual rate of 5.15 million in September, the National Association of Realtors said Friday. That was a 3.4% decline for the month, and the lowest pace of sales since November 2015.

What happened: Sales of previously-owned homes stabilized in August after declining for four straight months, so September’s lurch lower was surprising to some. Sales were 4.1% lower than year-ago levels. September’s selling pace missed the MarketWatch consensus forecast of a 5.27 million rate.

The median sales price in September was $258,100, which was 4.2% higher than a year earlier. Home prices are still growing faster than wages, but the pace of price increases is decelerating steadily.

That’s likely because inventory is ticking up gradually. At the current pace of sales, it would take 4.4 months to exhaust available supply, up from 4.3 months last month. And it’s taking properties longer to get snatched up: homes stayed on the market for 32 days in September, up from 29 days in August.

Read: Home-price gains decelerate to 11-month low as housing market tries for a soft landing

Big picture: The Realtors blamed another stagnant month in the housing market on rising mortgage rates, higher prices and the supply stranglehold. But it’s also likely that many would-be buyers are dropping out of a market that’s become too competitive, expensive and unsatisfying, especially as conditions in the rental market ease up. The national median rent declined compared to a year ago in September, Zillow ZG, -2.30% said Thursday. That was the first yearly decline since 2012, and reflects a glut of supply, with more to come.

What they’re saying: “Recent sluggishness seems increasingly driven by softer demand from would-be home buyers in the face of two emerging trends: falling rents and rising mortgage interest rates,” said Zillow Senior Economist Aaron Terrazas. “It all adds up to a situation in which supply-side factors are becoming less critical in driving home sales as they give way to softening demand. There’s still a lot of energy left in the housing market, but the rapid rise of the past few years has clearly begun to level off.”

NAR Chief Economist Lawrence Yun now forecasts that existing-home sales will be 1.6% lower in 2018 than last year. Economists at mortgage financier Fannie Mae are even more bearish: they’re projecting a 2% decline.

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