Existing Home Sales Ticked Up in September, But 7.49% Mortgage Rates Set Up a Rough Fourth Quarter
Home sales rose last month on a technicality, but the real story is a half-point rate spike that just cut buying power across the board and is already slowing the contracts behind it.
Existing home sales rose 1.5% in September. On the surface that sounds like good news after three straight months of declines. Look closer and it is not. The gain happened mostly because August got revised down, from a 2.0% drop to a 3.2% drop. So September did not really beat a strong August. It beat a worse one. The total sales pace is still running below a 4 million annual rate, and NAR's own chief economist is already warning the next quarter looks weak.
The Real Number Is 7.49%, Not 1.5%
Mortgage rates have climbed more than half a point since early September, up to 7.49%. Most of September's sales were locked in before that move, which is why NAR's chief economist Lawrence Yun said flatly that 'further increases in mortgage rates in recent weeks mean fewer buyers can qualify to purchase a home.' He also said August and September were the two slowest months for home sales all year, even with the headline bounce.
Realtor.com's chief economist Danielle Hale put a number on what that rate move actually costs a buyer. For someone with a $2,000 monthly budget, it is a $19,000 hit to how much house they can afford. Her words: 'The reset in rates over the last five weeks has shaved a little more than 6% off of the purchasing power of buyers across every budget, which is almost twice the typical price-savings advantage of buying in this less competitive season.' That is not a small adjustment. That is a buyer getting outbid by their own interest rate.
What a Slow Q4 Does to Real Estate Paychecks and Contractor Jobs
Yun told reporters on Tuesday that 'the fourth-quarter outlook for closing activity will clearly be down, maybe even measurably down,' and that 'we are seeing more delays in the contracts with these rising interest rates.' Translate that into real paychecks. Real estate agents, mortgage loan officers, title and closing staff, home inspectors, and moving companies all get paid when a sale closes, not when it goes under contract. A contract delay is a paycheck delay. If closings slip from Q4 into next year, that income slips with them.
It also hits the contractors my marketing company works with. Roofers, painters, and remodelers get a steady share of their work from homes changing hands, new owners redoing a kitchen or a roof before or after move-in. Fewer closings means fewer of those jobs lined up heading into winter, which is already the slowest season for that kind of work.
Why Insurance Agents See a Closing Slowdown Before Anyone Else
In my insurance agency, a homeowners policy gets written the moment a sale closes, not before. We see transaction volume in real time because it shows up directly in new policy count. When closings slow down the way Yun is describing, that slowdown hits an agency's new business pipeline before it shows up in any national headline. If you run a business that depends on home sales closing, whether that is insurance, title work, moving, or home services, build your fourth quarter plan assuming fewer transactions than normal, not more.
Supply Is at a Decade High, and Sellers Still Are Not Moving
The supply of previously owned homes for sale is up 4.6% from a year ago to 1.6 million, a 4.8 months supply, holding at the highest level in more than a decade. Sales rose 2.8% in both the South and West in September, were flat in the Midwest, and fell in the Northeast. Earlier this year the country had been making some progress narrowing the 'lock-in' effect, where homeowners with low existing mortgage rates refuse to sell and give that rate up. That progress has stalled. The spread between current mortgage rates and the average rate existing homeowners already have is back near record wide, meaning there is still no real sign of locked-in sellers meeting buyers where affordability actually works.
What to Watch If You Are Buying, Selling, or Running a Transaction-Dependent Business
If you are buying, do not plan your budget off last month's rate. Plan it off 7.49%, and recheck your pre-approval now rather than finding out at closing that your purchasing power dropped 6%. If you are selling, more supply sitting on the market for longer means pricing right the first time matters more than it did over the summer. If your income depends on transaction volume, whether that is commissions, contractor work, or insurance, watch Yun's fourth quarter warning closely and plan your cash flow for a slower stretch rather than hoping the September bounce repeats.