Home Sales Dropped by 16% Last Month

I reviewed the 7 county MLS sales report for September. The biggest takeaway is why did the number of sold properties drop by 16% from last September? I thought rising interest rates that began with the August Jobs Report on September 7^th might cause under contracts to drop as rates rose by ¼% last month. And under contracts did drop by 5.5% which wasn’t a big surprise to me. Here are the highlights from the report—

• Buyers purchased just 3,897 homes last month, down 16.5% from last September and down 22% from 2 years ago.
• 4% of August under contracts didn’t close in September, which is not an abnormally high number.
• We had 5,487 homeowners list their homes for sale last month as new listings, up 1% from a year ago.
• Buyers placed 4,304 homes under contract last month, down 5.5% from last year.
• The average sales price of an attached home hit $347,072, an annual increase of 12.4%.
• The average sales price of a detached home was $497,095, an increase of 6.1% from last September.
• Overall, the average sales price increased 7.2% to $451,591.
• The median sales price of an attached home increased 13.1% to $299,713
• The median sales price of a detached home increased just 4.9% to $425k.
• Overall, the median sales price increased 6.7% to $399k
• The sales to list price ratio dropped to 99.3% last month which is down from 99.7% a year ago.
• Average CDOM increased by 6 days to 39 days year over year.
• Median CDOM increased by 3 days to 14 days year over year.
• There were 7,692 active listings for sale at EOM.
• This means we had 1.97 months of inventory for sale. This is the highest figure we have seen in the last 3 calendar years.
• In September 70.3% of our sales were homes priced in the $300k-$600k price range. Until September 62.7% of our sales were in this price range.
• And only 54% of active listings were priced in the $300k-$600k price range.
• Attached under contracts dropped 9.1% last month from a year ago. Are even attached home prices getting too high?
• Year to date we have had 42,772 homes placed under contract, which is the fewest since 2014.
• But, we have sold 40,253 homes so far this year which is in our “normal” range for the last 5 years.
• Average sold prices peaked in April this year at $535k for detached homes, since then prices have dropped by 7.2% to $497k.
• Median sold prices peaked in April this year at $452k for detached homes, since then prices have dropped by 6% to $425k.
• But, median sold prices on attached homes peaked in May at $305k and have only dropped by 1.7%.

So, why did home sales drop by 16%? I think the answer is in the yellow highlighted section above. Demand is for homes in the $300k-$600k price range and there simply were NOT enough of homes in this price range for sale. Demand is far outstripping supply in this price range. If we had more homes for sale in this price range I believe our number of sales would have been much higher.

It appears that lofty home prices and rising interest rates are starting to put a lid or glass ceiling on our housing market. Demand even softened sizably (by 9.1%) for attached homes last month. Sellers beware—you can’t price your home today like its April. Your price today probably needs to be at least 5% lower on a detached home than 6 months ago. And even sellers of attached homes need to realize that your price today should be 1-2% lower than it could have been in May. In fact, you may want to price your homes at the original list price of those sold comps from 6 months ago.  

And interest rates rose more last week which should cause demand to drop; but I also expect supply levels will drop too as this news spreads.