Interest rates and low inventory caused home sales to fall in September, but Realtors expect housing conditions to improve over the next six months.
The Buyer Traffic Index decreased to 51 in September, down from 61 in September 2017, according to the National Association of Realtors Confidence Index.
The index gathers monthly information from Realtors about local real estate market conditions, characteristics of buyers and sellers and issues affecting homeownership and real estate transactions. An index of more than 50 indicates an expectation of improvement.
The Seller Traffic Index also decreased, falling to 41 in September, down from 45 in September 2017, according to NAR.
However, despite these decreases, Realtors expect that, over the next six months, conditions will improve for the single-family housing market. The Confidence Index – Six-Month Outlook Current Conditions came in at 53 in September.
The same can’t be said for other housing markets. For example, the index for townhomes came in at 44, and 43 for condominium properties.
When asked about major issues affecting housing transactions in September, Realtors answered that low inventory and interest rates were the most common issues.
But while Realtors may be optimistic about the future, some economists disagree.
“Our expectations for housing have become more pessimistic: Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019,” Fannie Mae Chief Economist Doug Duncan said.
Most experts expect one final rate hike in December 2018 and another two or three rate hikes in 2019. These rising rates will only continue to push potential homebuyers out of the market.
In fact, recent data from NAR showed that existing home sales hit their lowest level in three years, and Freddie Mac data shows interest rates are currently at a 10-year high. Now, these factors could be pushing more families to rent instead of buying a home.
Despite the difficult conditions, some home buyers managed to increase their share. First-time buyers accounted for 32% of sales in September, up from 29% in September last year.