October 13, 2026
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Existing home sales edged upwards by 1.5% in September to 3,990 thousand after having declined 3.2% in August. Home sales have been floundering at about this same pace for the past two years. In the past year home sales have declined 2.2%.
Lawrence Yun, NAR chief economist said that. urn near 6%.“Despite the small monthly gain on a seasonally adjusted basis, August and September marked the two slowest months for home sales this year,” said NAR Chief Economist Lawrence Yun. “Further increases in mortgage rates in recent weeks mean fewer buyers can qualify to purchase a home.” He added that, “Higher inventory and lengthening days on market give buyers improved negotiating power. Home sellers need to be realistic about local market conditions, which could require price discounts and other incentives to attract buyers.”
Mortgage rates have risen to 7.25%. The war in Iran has curtailed the flow of oil from the Mideast and oil prices climbed from $65 before the war to about $90. It is hard to see a resumption of oil production any time in the near future. As a result, the CPI should accelerate this year to 3.4% but then slow to 2.1% next year. The core rate should be quite steady at 2.5% this year, but the combination of subdued growth in the money supply, a slight decline in home prices and rents, and a small gain in unit labor costs should lead to an inflation rate in 2027 of about 2.2%. The Fed under new Chair Kevin Warsh appears to be serious about shrinking the inflation rate back to the 2.0% mark. As a result, the Fed is widely expected to increase the funds rate by 0.5% between now and yearend to 4.1%. For what it is worth, we expect mortgage rates to inch lower from 7.25% to perhaps 6.5% by the end of next year as inflation subsides.
The average home sat on the market for 33 days in September compared to 31 days in August and 22 days in September of last year .. That is still a relatively short time period by any historical standard, but it is not as short as it used to be. The housing market has clearly softened, but it has not collapsed.
There are still relatively few homes available for sale but the inventory has been increasing. The number of homes on the market is now at 4.8 months and is gradually rising. The inventory is close to the 5.0 month supply that is required to balance the demand for and supply of homes. Homeowners who have been reluctant to sell are beginning to put their houses back on the market. Eventually the inventory level will climb above the desired 5.0 month supply which should give some leverage to home buyers and cause home prices to fall.
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Home prices declined 2.4% in September to $417,500 after having fallen 2.0% in August. The year-over-year change is now 1.3%. Look for a slight decline in home prices in 2027.
Housing affordability is dependent on three factors — home prices, mortgage rates, and consumer income. Jobs growth is climbing slowly which boosts consumer income, Mortgage rates may decline slightly in 2027. And home prices should also decline. As a result, housing affordability should climb in the months ahead and the median-income earning family will have about 25% more income than required to purchase a median-priced home by the end of 2027.
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Given all of the above we expect existing home sales to rise 7.4% in 2027 and reach 4,365 thousand by the end of that year.
We expect to see 3.5% GDP growth in the third quarter and 2.6% growth for this year as a whole, and 2.8% GDP growth next year.
Stephen Slifer
NumberNomics
Charleston, S.C.
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