September Home Sales Rose Despite Sky-High Prices

Home prices were up in September, but that didn't keep buyers away.

Home prices have climbed exponentially over the past year as limited inventory and low mortgage rates have driven buyer demand. Now, you'd think that at some point, buyers would run out of room in their budgets to keep paying sky-high prices. But home sales managed to rise in September despite the many reasons for buyers to pull back.

In September, existing home sales rose 7% from the previous month, as per the National Association of Realtors. Meanwhile, the median sale price for an existing home reached $352,800 -- a 13% increase from the previous year.

At the same time, the number of homes available to buy at the end of September was down 0.8% from August and 13% from the previous September. These days, housing inventory is sitting at a 2.4-month supply on a national level. For context, it takes a 5- to 6-month supply for a more equalized housing market (as opposed to today's market, where sellers clearly have the advantage).

Will home buyers continue to pay higher prices?

While home prices may be at a high, low mortgage rates are helping offset them. There's no indication rates are about to start climbing anytime soon, but buyers may not want to take that chance. That's why many are willing to pay today's sky-high prices for homes -- they want to get in while rates are still affordable.

One thing that could really help home prices come down is an uptick in inventory. Whether we'll actually see that happen in the coming months is questionable. Historically, the winter months have not been a popular time to list a home, so there's a good chance real estate inventory will remain sluggish until spring.

Furthermore, many sellers have held off on listing their homes due to uncertainty fueled by the coronavirus pandemic. Since the pandemic isn't over, that sentiment may continue well into 2022. If that happens, it could cause today's lack of inventory to become an ongoing problem for the housing market.

Should you buy a home today?

Overpaying for a home could have negative consequences. First, it could mean having to take on a higher mortgage payment than you can easily afford. It could also mean having to bring more funds for a down payment to the table, which could force you to dip into your savings account for more money than you're comfortable with.

Additionally, right now, home prices are inflated more so due to buyer demand than anything else. In a few years' time, as more supply hits the market, that demand could wane and prices could come down. But if you pay a premium for a home now and end up needing to sell it in a few years, you could end up having to take a loss.

This isn't to say you absolutely shouldn't buy a home today. After all, September's sales numbers show us that buyers are still biting. Just be careful before moving forward with a home purchase, especially if you're not sure you can swing the mortgage attached to it.