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Washington – U.S. home sales fell 2.2% in September, as rising home prices and lower inventories have stifled homebuyers.

The National Association of Realtors said Tuesday that homes sold last month declined at a seasonally adjusted annualized rate of 5.38 million units, ending a two-month streak of sales gains. Existing-home sales are up 3.9% from a year ago, but September’s stumble shows the limits of the boost that declining mortgage rates had been providing.

As average mortgage rates have fallen nearly a whole percentage point in the past year to 3.61% in September, economists say higher prices and a lack of listings have put a ceiling on the growth seen this past summer.

“The resale housing market is caught in a crosscurrent of conflicting forces,” said Shernette McLeod, an economist at TD Economics. “On one hand, lower mortgage rates and a strong labor market have improved buying conditions. On the other, the duo of low inventory and rising home prices have kept a lid on the pace of sales expansion.”

Homebuyers have been hamstrung by a shortage of available properties this year, especially at the lower-priced end of the market. Inventory is down 2.7% from a year ago. Land and labor shortages have also constrained building, so a tightening supply of homes has pushed prices up at a pace faster than income. Home prices rose in all four regions in September, while sales of existing homes declined.

“Even today’s low mortgage rates and healthy jobs situation can’t overcome the lack of inventory of homes below $300,000,” said Robert Frick, an economist at Navy Federal Credit Union. “Fortunately, the long-term outlook for housing is better, as housing starts and permits are increasing, meaning there will be more homes on the market in the months ahead.”

The median sales price climbed 5.9% from a year ago to $272,100, outpacing wage gains as the strongest price appreciation since January 2018.

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