M
ortgage rates hit a year-low in September, while inventory levels rose, but failed to boost sales as prices continued their upward trend. Existing home sales fell 1% in September compared to August and declined 3.5% year-over-year, according to the National Association of Realtors. The annualized seasonally adjusted rate dropped to 3.84 million, its lowest level since October 2010.

    Despite slower sales, inventory levels continue to rise, reaching a 4.3-month supply in September, up from 3.4 months a year ago. However, this still falls short of pre-pandemic levels. Economists attribute the sluggish sales to the "lock-in effect," which keeps home prices elevated.

    While a fall rally now seems unlikely, economists remain optimistic about sales in the coming months due to expected decreases in mortgage rates and increased inventory. This could lead to more home buying and selling activity in the fourth quarter, potentially pushing total home sales above 2023 levels.

    However, there are concerns that increased downside risks could stymie a late-year uptick. Mortgage rate predictions remain uncertain, and inflation can be sticky. Even if inflation eases, a weaker economy could hurt demand from homebuyers. The upcoming presidential election also introduces uncertainty, potentially leading to higher mortgage rates and a stuttering housing market.

    Home prices continued their upward trend in September, rising 3% to a median price of $404,500. While prices have fallen from June's record high, it's the 15th consecutive month of annual price increases. However, gains have slowed, allowing wage growth to outpace home price appreciation and potentially improving affordability.

    First-time homebuyers continue to be deterred by rising prices, accounting for just 26% of existing home sales in September, matching an all-time low. All-cash sales made up 30% of transactions, an increase from August.