Homebuilders Gain as Falling Mortgage Rates Boost September Sales
A 1.5% rise in existing-home sales and improving builder sentiment suggest a potential stabilization in the U.S. housing market.
The U.S. housing market showed renewed signs of life in September as a pullback in mortgage rates helped lift existing-home sales, providing a tailwind for homebuilders heading into the final quarter of the year.
Sales of previously owned homes rose 1.5% from the prior month, according to data from the National Association of Realtors (NAR). On a year-over-year basis, sales activity was up 4.1%, suggesting buyers are cautiously re-entering the market after a period of suppressed activity.
The positive sales data is closely linked to a recent easing in borrowing costs. The average rate on a 30-year fixed-rate mortgage dipped to 6.27% in mid-October, according to Freddie Mac's Primary Mortgage Market Survey. While still significantly higher than the lows seen in recent years, this decline from earlier peaks has provided a crucial boost to buyer affordability.
"Falling mortgage rates and improving housing affordability are contributing to the increase in home sales," said NAR Chief Economist Dr. Lawrence Yun. This sentiment was echoed by builders themselves, with the NAHB/Wells Fargo Housing Market Index, a key measure of builder confidence, rising five points to 37 in October.
Despite the uptick in transactions, the market remains challenging. Median home prices continued their upward march, climbing 2.1% from the year before to $415,200. This marked the 27th consecutive month of year-over-year price increases, underscoring the persistent supply-and-demand imbalance that has defined the post-pandemic housing landscape.
Housing inventory, while improving, remains tight by historical standards. Total supply stood at 1.55 million units at the end of September, a 14% increase from a year ago but still below pre-COVID levels. This translates to a 4.6-month supply at the current sales pace, indicating that market conditions have not yet fully shifted in favor of buyers.
Sam Khater, Freddie Mac’s Chief Economist, noted that the combination of moderating rates and increased housing stock is creating a more favorable environment for potential homebuyers. "Lower rates have led to an increase in refinance activity," Khater stated, adding that this, "combined with more housing inventory and slower house price growth, are creating a more favorable environment for potential homebuyers."
Investors are watching these trends closely, with homebuilder stocks like D.R. Horton (DHI) and Lennar (LEN) often seen as direct beneficiaries of a stabilizing housing market. The sector's performance is a critical indicator for the broader economy, as construction activity and home sales have significant ripple effects on consumer spending and employment. The latest data provides a glimmer of optimism that the sector may be finding its footing after a volatile period.