Summary

By Robert Hughes

Sales of existing homes fell 2.2 percent in September to a 5.38 million seasonally adjusted annual rate. Sales are still up 3.9 percent from a year ago, recovering from a slowdown during 2018 and early 2019. However, sales are about even with levels from 2016.

Sales declined in all four regions in September: sales were off 3.1 percent in the Midwest and were unchanged from the year-ago level; sales declined 2.8 percent in the Northeast, putting sales 1.5 percent above year-ago levels; sales dropped 2.1 percent in the South, the largest region by volume, leaving that region's sales rate 6.0 percent above the year-ago pace; and sales fell 0.9 percent for the month in the West and are 5.6 percent above the September 2018 rate.

Sales in the market for existing single-family homes, which account for just under 90 percent of total existing-home sales, fell 2.6 percent in September, coming in at a 4.78 million seasonally adjusted annual rate (see top chart). From a year ago, sales are up 3.9 percent. The September pace is about in line with the mid-2015 pace. Sales of existing single-family homes have been in a range of 4.2 million to 5 million since 2015, well below the peak pace of 6.34 million from September 2005 (see top chart).

Sales were down across all four regions: sales dropped 3.3 percent in the Midwest to 1.20 million; the Northeast saw a 3.3 percent decline to 580,000; the South posted a 2.4 percent pullback, coming in at 2.00 million; and sales declined 2.0 percent in the West to 1.00 million from 1.02 million in the prior month.

Condo and co-op sales posted a 1.7 percent gain for the month, putting sales 3.4 percent ahead of the September 2018 pace. Sales came in at a 600,000 pace for the month, matching the November 2012 pace. Since late 2012, sales of existing condos and co-ops have remained in a range of 540,000 to 640,000, well below the peak of 930,000 from June 2005 (see top chart).

Total inventory of existing homes for sale was unchanged at 1.83 million in September, pushing the months' supply (inventory times 12 divided by the annual selling rate) to 4.1, up from 4.0 in August. For the single-family segment, the months' supply rose to 4.0 from 3.9 while the condo and co-op months' supply fell to 4.3 from 4.4. Both remain about in line with the trend over the last few years (see bottom chart).

Rising home prices continue to weigh on home affordability. For the housing market overall, affordability remains somewhat favorable, but sales are unlikely to move significantly higher in the coming months. Furthermore, new home construction is unlikely to contribute significantly to growth in gross domestic product in coming quarters. Still, consumer spending is growing, supported by a tight labor market, rising incomes, strong balance sheets, and generally high levels of consumer confidence. The main risks on the horizon continue to be uncertainty surrounding trade policy and fallout from ongoing trade wars, uncertainty regarding monetary and fiscal policy, and uncertainty from the expanding controversies surrounding the current administration and potential for impeachment. The latter is likely to worsen as the 2020 election cycle approaches.

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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.