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Existing home sales fell along with housing starts in September, according to the National Association of Realtors and the U.S. Census Bureau. NAM Chief Economist Chad Moutray broke it down for us.

Home sales decline: “Existing home sales declined 1.5% from 4.78 million units at the annual rate in August to 4.71 million units in September,” said Moutray. “On a year-over-year basis, existing home sales plummeted 23.8% from 6.18 million units in September 2021.”

• September was the eighth straight month of decline, reaching the slowest pace since May 2020, according to the National Association of Realtors.
• “Affordability has become a big challenge for potential homebuyers, with soaring costs and higher mortgage rates dampening demand,” said Moutray.
• “In September, existing home sales weakened in every region except the West, which was flat for the month,” said Moutray.

Why it’s happening: “Higher mortgage rates and issues with affordability have sharply lessened demand in the housing market,” said Moutray. “The  average 30-year fixed-rate mortgage was 6.94% last week, the highest since April 2002.”
 
Housing starts drop: “New residential construction activity fell 8.1% from 1,566,000 units at the annual rate in August to 1,439,000 units in September,” said Moutray.

• “Single-family housing starts declined 4.7% from 936,000 units to 892,000 units, the slowest pace since May 2020,” he added. “At the same time, multifamily activity, which can be highly volatile from month to month, dropped 13.2% from 630,000 units to 547,000 units.”
• “On a year-over-year basis, new housing starts decreased 7.7% from 1,559,000 units in September 2021, with single-family construction activity plummeting 18.5% over the past 12 months,” said Moutray.

Looking ahead: “Meanwhile, new housing permits—a proxy for future residential construction—rose 1.4% from an annualized 1,542,000 units in August to 1,564,000 units in September, rebounding somewhat after falling in the two prior months,” said Moutray. 

• “On a year-over-year basis, housing permits have fallen 3.2% from 1,615,000 units in September 2021, with single-family permits plunging 17.3% over the past 12 months from 1,054,000 units one year ago.”