U.S. State of the Housing Market, September Recap

Written by Breck Hapner

Editor’s note: Welcome to the Haven U.S. State of the Housing Market series. Every month, we will share an update explaining details and projections related to the U.S. real estate sector to keep you informed.

Currently, the U.S. housing market is experiencing significant consternation and uncertainty. Surging mortgage rates have led homeowners to hold onto their properties, resulting in tight inventory and high prices.

There are 550,000 fewer houses for sale nationwide this September compared to the September average in 2017 through 2019, marking a 45 percent decrease. Every market is exhibiting the same symptoms: huge demand squashed by minuscule inventory and massive unaffordability issues.

Housing Groups Tell Fed to Stop Raising Interest Rates

The largest problem, according to experts, are mortgage rates. An article from the October 10th issue of the National Association of Realtors (NAR) Realtor Magazine details how NAR, the National Association of Homebuilders, and the Mortgage Bankers Association recently sent a letter to Fed Chairman Jerome Powell. The correspondence outlined how the Federal Reserve’s monetary policy has “exacerbated housing affordability and created additional disruptions” for the real estate market.

The question of whether the Fed will heed this warning remains uncertain, especially as rates climb toward eight percent. While the aim of these rate hikes is to curb inflation, the potential costs are still unclear. What is likely to happen? NAR Chief Economist Lawrence Yun says, “The fast-rising interest rates are breaking several sectors of the economy.” As the housing market flounders, concerns rise over the future of the job market and a likely recession, further exacerbating a possible housing crisis.

A Newly Updated and Timely Monthly Report

The realtor.com September 2023 Monthly Market Housing Trends Report, released on October 5th, marks the first comprehensive update from realtor.com for the entire month of September. This is an important advance for keeping up with the latest news and statistics. For example, NAR won’t publish September’s numbers until October 19th, while the CoreLogic S&P Case-Shiller Index recently disclosed the home price trends for the month of July on September 26th!

What Does the realtor.com September Housing Market Report Say?

The report acknowledges the small August increase in newly listed homes as “short-lived, as new listings declined with more typical seasonal patterns in September.” However, there was a slight increase in inventory in September compared to August, which is highly unusual.

In addition, the report found that, in August, the share of home listings with price reductions increased as buyers “continue to contend with high listing prices, mortgage rates, and lower inventory than last year.”

That being said, compared to September 2022, this September’s housing inventory was down four percent nationwide. However, “the gap between this year and last year is shrinking as the inventory of homes for sale in September grew by 4.9 percent over August.”

This might be a little bit confusing because inventory grew by four percent compared to 12 months ago, but inventory increased by 4.9 percent on a month-to-month basis from August through September 2023. “This is higher than the typical seasonal trends in the pre-pandemic 2017 to 2019 period when inventory remained fairly flat between the two months.”

So, during this time of year, pre-pandemic levels should remain stable from August through September, yet this year it increased by nearly five percent. Despite this modest rise, the available inventory is still down 45 percent, equating to 550,000 fewer homes for sale, compared to the averages from 2017 through 2019. For a visual representation regarding this point, refer to the Active Listing Count line graph from realtor.com. Let’s examine this in the following section.

Chicago, IL

The Active Listing/Inventory Count

According to the graph, inventory does not have to increase to pre-COVID levels in order to see prices decrease. Starting in May through the remainder of 2022, active listings saw an increase, causing a decline in home prices during the latter half of the year. Despite this, active listings remained well-below pre-pandemic levels in July 2022, with 700,000 homes for sale compared to 1.2 to 1.3 million in the period from 2017 through 2019.

There wasn’t any other month where active listings exceeded 800,000, although inventory levels were much higher compared to 2022. It is important to note that inventory levels don’t necessarily need to reach 1.2 million for prices to decrease, because last year’s active listings didn’t even come close to pre-COVID levels. In April 2022, there were 375,000 homes for sale, which then increased to 700,000 active listings by July 2022. So, in the span of three months, inventory levels doubled, causing a drop in housing prices during the last half of 2022, not because inventory levels reached the historical norm of 2017–2019.

The increase is unusual because in 2017, inventory levels peaked in August, while in 2018 they peaked in October, due to the rise in mortgage rates to five percent. In 2019, inventory levels peaked in July, so it’s highly unusual to see inventory levels increasing during September 2023. It will be interesting to see what happens if demand falls. The ongoing trend of fewer home sales closing is a clear indication, likely influenced by the current mortgage rates exceeding seven percent.

Number of Pending Home Sales

According to the realtor.com Pending Listings Count graphic, the total number of houses under contract with a buyer in September, set to result in a home sale within one to two months, is down 12.2 percent compared to September 2022. This is important because, as the report states, “Pending homes are an early indicator of the direction of sales which cooled to a lower annual pace of 4.04 million in August.”

This is an incredibly low number, with the market currently experiencing the slowest sales pace in 13 years, excluding January this year, which saw approximately 4 million sales. The slowdown is due to the fact that “higher mortgage rates in July and August impacted September’s inventory of homes under-contract.”

Therefore, experts expect to see plunging home sales. As mentioned in the NAR Realtor Magazine report, mortgage rates are currently near eight percent, the highest level since October 2000, and will impact closed home sales and pending contracts for the remainder of the year. Also, during the winter months, especially November, December, and January, home sales typically experience a decrease.

Newly Listed Home Sales

The Newly Listed Homes graph shows there is a lack of existing houses for sale because the number of new listings this year is well below the figures from the past six years. According to realtor.com, newly listed homes fell 9.1 percent below 2022 levels. “Higher mortgage rates impact selling activity through homeowners feeling ‘locked-in’ to previously low rates and thus the inventory of existing homes continued to be limited this past month.”

Rising mortgage rates are deeply affecting new listings, impacting demand as well as supply. Obviously, homeowners don’t want to sell a home they acquired with a three percent mortgage and buy a home with mortgage rates nearing eight percent.

Aside from the very small nonseasonal increase in August, newly listed homes are falling per normal seasonality trends. It is also important to note that there were approximately 358,000 new listings this September. This is well below the figures observed in 2017 through 2021, when the number of newly listed houses ranged from 450,000 to 500,000.

According to realtor.com, only four of the 50 largest U.S. metro areas showed increased inventory compared to last year. Southern metros Memphis, New Orleans, and San Antonio have experienced inventory growth, although considerably lower than pre-pandemic years. The only exceptions are Austin and San Antonio, both of which are displaying higher levels of inventory compared to 2017-2019.

New listing increases in 2023 over 2022 included only San Antonio and Buffalo, with the largest new listing decreases in Las Vegas, New York, and Detroit.


Days on Market

Houses are taking longer to sell compared to the past couple of years, but they’re still selling faster on average in comparison to September 2017 through 2020.

This September, homes remained on the market for 48 days, indicating a one-day slowdown in sales compared to the same period in 2022. That being said, homes are selling about two weeks faster when compared to pre-COVID levels.

Share of Price Reductions

The Price Reduced Share graph shows that the property share of price reductions is 17.8 percent, meaning, on average, two out of every 10 houses for sale have reduced their asking prices.

According to realtor.com, the share of price-reduced homes are following the normal seasonal patterns but there may be more trouble as “high listing prices and high interest rates are pushing the limits of what buyers will bear.”

The graph depicts a fairly significant increase in the share of reduced-priced listings, from about 16 percent in August to 18 percent in September. To provide insight, in March 2022, the share of price reductions was only six percent. The trajectory rises by July 2022, with the share of price reductions rising to 19 percent.

In the span of four months, the share of price reductions tripled, causing prices to drop in 2022, whereas in March 2023, the share was about 12 percent. However, even though we are seeing a sharp increase in price reductions this September, it’s not close to the giant increase seen in 2022.

Much could change, because if the share of price reductions skyrockets, it would negatively affect the U.S. housing market.

Four Largest U.S. Metro Regional Statistics

The September 2023 Regional Statistics graph in the realtor.com article shows the four major regions in their combination of the 50 largest metros. In regard to active listing percentage change on a year-over-year (YOY) basis, there was a 27.7 percent decrease in the West, whereas the South saw a gain of 1.5 percent. New listings fell by double digits in the Northeast and the West, and decreased by eight to nine percent in the Midwest and the South.

Days on the market showed negative for the Midwest, Northeast and the West, indicating houses are selling faster compared to one year ago. For example, in the West, houses are selling four days faster compared to 2022. It is clear that the number of active listings is an issue, as inventory levels are already at historical lows nationwide.

Four Largest U.S. Metro Regional Statistics vs Pre-Pandemic Data

The September 2023 Regional Statistics vs Pre-Pandemic 2017-2019 graph shows the four largest of 50 metros YOY data, comparing it to pre-COVID levels, displaying a wide difference in numbers. Active listings in the Northeast are down by 60 percent this September compared to the September average in 2017 through 2019.

The graph also depicts decreases in the other metros as well. For example, even though the South’s active listings increased 1.5 percent compared to 12 months ago, it decreased 34 percent when examining pre-COVID levels.

The reason we are seeing this huge drop in houses for sale is because new listings are falling by double-digits for each of the four largest metros. The West experienced the most substantial decline, with a drop of nearly 34 percent. Houses are selling two to three weeks faster in the Midwest, Northeast, and the South, whereas the West is selling within approximately the same timeframe compared to pre-pandemic data.

Brooklyn, NY

The Bottom Line for September

During September 2023, the number of homes actively for sale decreased by four percent, and the number of unsold homes fell by 7.2 percent compared to last year. This trend is mainly due to the challenges posed by mortgage rates, making it tough for both homebuyers and sellers to navigate through one of the toughest U.S. housing markets in recent memory.

Amid fears of recession and a possible U.S. housing crisis during the next four months, it remains to be seen how the U.S. economy will react to extremely high interest rates when so many markets are being adversely affected, including the U.S. job market. The entire housing market will further suffer if too many potential homebuyers lose employment.

NAR believes the damage could be irreparable if things do not change soon. 

“The Fed needs to stop raising rates and strongly consider cutting interest rates next year,” Yun said. “That would be the ‘soft landing’ without the net job cuts to the economy.”

In our October recap, Haven will take a further look at the numbers: how the current U.S. housing market is reacting to prevailing economic factors influencing real estate.

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