U.S. Home Sales Decline for Third Month as Inventory Shortage Intensifies, Redfin Reports

U.S. home sales fell for the third consecutive month in September, posting the largest year-over-year decline since 2016, according to a Redfin market analysis. Despite the drop in sales volume, the national median sale price rose 7.6% to $288,000, highlighting a market constrained by a severe lack of homes for sale. The ongoing inventory shortage, now in its 24th month of decline, is creating a competitive environment that continues to favor sellers.

What is Causing the Decline in Home Sales?

The primary driver behind the sales slump is a historic inventory shortage. The number of homes for sale nationally plunged 10.9% in September compared to a year ago. This marks two full years of declining supply. According to Redfin chief economist Nela Richardson, “The housing market is running on fumes due to low inventory.” This shortage is most acute for affordable homes priced under $260,000, a segment that has not seen an increase in new listings in two years. With fewer options available, many potential buyers are being priced out or forced to wait.

How Does Low Inventory Affect Buyers and Sellers?

A key metric for understanding market balance is the months of supply, which indicates how long it would take to sell all homes on the market at the current sales pace. In September, supply stood at just 3.3 months. A market with less than six months of supply is considered a seller's market, giving sellers leverage in negotiations. This dynamic is reflected in the data: the average sale-to-list price ratio was a strong 98.4%, and nearly a quarter (23.6%) of homes sold for more than their asking price. For buyers, this means facing more competition and fewer opportunities for negotiation.

Which Markets Were Most Affected by External Factors?

Weather events significantly disrupted real estate activity in several major markets. Hurricane Irma led to sales declines of more than 15% in major Florida metros, with Miami experiencing a 38.4% year-over-year drop in sales. Conversely, Houston, which was impacted by Hurricane Harvey in August, showed signs of recovery in September, with sales essentially flat compared to the previous year. This rebound suggests that while severe, weather-related disruptions can be temporary.

What Were the National Trends in Competition and Pricing?

Market velocity and competition varied significantly across the country. Nationally, the median days on market increased slightly to 42 days, but the market was still five days faster than in September 2016. The most competitive markets were on the West Coast:

• San Francisco, CA: 71.7% of homes sold above list price.
• San Jose, CA: 71.6% of homes sold above list price.
• Oakland, CA: 64.6% of homes sold above list price.

Price growth was also strongest in Western and Southern metros, led by San Jose, CA (16.3% growth) and Tucson, AZ (15.8% growth). Only three metropolitan areas saw price declines: Camden, NJ; Baltimore, MD; and Newark, NJ.

In summary, the U.S. housing market in September was characterized by a clear paradox: falling sales amid rising prices. The core issue is a deep and persistent inventory shortage, particularly for entry-level homes. For buyers, this means preparing for a competitive search. For sellers, it represents an opportunity, provided their home is priced in line with market value. The key takeaway is that the market's health is directly tied to the supply of available homes, which shows no immediate sign of significant improvement.