Increased inventory and declining prices were not enough to seal the deal for some prospective homebuyers in September. Sales of both new and existing homes were down from August’s rather lackluster performance. Although demand remains high, concerns about rising mortgage rates and a shortage of entry-level properties kept buyers at bay.

After a modest gain in August, sales of new single-family homes dropped 5.5 percent in September, the lowest month-over-month decline since December 2016, and were down 13.2 percent from the same period last year.

In a reverse from earlier in the year, the median sales price of a new home ($320,000) was down 3.5 percent year-to-year, and the supply of inventory rose from 6.5 to 7.1 months. Yet, at an average price of $377,200 and with mortgage rates approaching their highest level in eight years, many would-be buyers cannot afford to purchase a new home.

Sales of existing homes extended their slump for the sixth straight month, sliding 3.4 percent, to their lowest level since November 2015. Overall, sales are down 4.1 percent from a year ago.

Inventories increased slightly, but the median home price ($285,100) is up 4.2 percent from a year ago, which is keeping many first-time buyers out of the market. Single-family home sales fell 3.4 percent from August and are down 4.0 percent from last September. Even sales of more affordable condos and co-ops ($239,200) declined 3.4 percent and are 5 percent below last year’s figures.

Some of the softening in sales can be attributed to the impact of hurricane activity in the South and Southeast regions of the country. But affordability remains the biggest challenge for the industry.

Weakening sales in recent months have begun to curb, but not reverse, rising home prices. At the same time, rising mortgage rates are eating away at whatever savings prospective buyers may have hoped to gain from more favorable prices.

Even though consumers are optimistic about their prospects and the economy as a whole, they are losing confidence in their ability to purchase a home. According to real estate website Redfin, early stage homebuying activity increased 11.2 percent from August to September, but the number of those making offers was down 13.7 percent from a year ago.

Fannie Mae reports that after increasing 5 percent in September, the net share of respondents to its Home Purchase Sentiment Index (HPSI) stating "now is a good time to buy a home" dropped back 5 percent in October, the second largest decline in the survey’s history. The net share of respondents stating "now is a good time to sell a home" also fell by 3 percent. October’s overall score was the lowest in a year.

Weakening sales also are impacting builders. New home construction activity (in number of units) fell by 5.3 percent from August to September, with single-family home starts dropping by slightly less than 1 percent.

Completions also were down, by 4.1 percent and 8.7 percent, respectively. Requests for permits were off by about half a percentage point overall, but single-family permit requests rose 2.9 percent.

These current trends suggest that while homeownership remains a goal for many Americans, buyers are no longer willing to pursue that goal at any cost. And that will have consequences for both sellers and builders. Noted NAHB Chief Economist Robert Dietz in announcing the results of the association’s October Home Market Index (HMI), "Unless housing affordability stabilizes, the market risks losing additional momentum as we head into 2019."