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US Home Sales Decline Again As Mortgage-Rate Rise Stings

U.S. existing home sales fell for a ninth straight month in October as the highest mortgage rates in more than a decade pushed buyers out of the market.


Sales of previously owned homes declined 5.9% in October from the prior month to a

seasonally adjusted annual rate of 4.43 million, the weakest rate since May 2020, the

National Association of Realtors said Friday. October sales fell 28.4% from a year earlier.



The streak of declines is the longest on record, NAR said.


Existing-home sales have dropped about 32% from their recent peak in January. This

year’s decline in sales marks one of the biggest impacts from the Federal Reserve’s aggressive interest-rate increases aimed at cooling the economy and bringing down high inflation.


Broader economic uncertainty and high home prices have also made buyers more

nervous about making home purchases, real-estate agents say.


At the same time, sellershave largely stepped away from the market. Many current homeowners have mortgage rates below 5%, so they are opting to stay put rather than selling and buying another home at a higher rate.


The low inventory has kept prices from dropping even as the number of home sales has

slid. The median existing home price rose 6.6% in October from a year earlier to $379,100, NAR said. Prices fell month-over-month for the fourth straight month after

reaching a record high of $413,800 in June.


The housing-market slowdown is expected to persist because home-buying affordability

is near its lowest level in decades. First-time buyers who have stepped back from the market are now facing rising rents and high inflation that can make it more difficult to save for down payments.


The Fed is expected to continue raising rates. Inflation stayed high in October, the labor

market remained tight and consumers continued to spend robustly at retailers—all signs the economy is still running too hot for the Fed’s comfort.


Cooling the once-hot housing market is part of the Fed’s process because home sales

are highly interest-rate sensitive and fuel related economic activity such as spending on

renovations, furniture and appliances.


“More potential home buyers were squeezed out from qualifying for a mortgage in

October as mortgage rates climbed higher,” said Lawrence Yun, NAR’s chief economist.


Economists surveyed by The Wall Street Journal had expected a 7.2% monthly decline

in October in sales of previously owned homes, which make up most of the

housing market.


Excluding the early months of the Covid-19 pandemic, October’s existing-home sales

rate was the lowest since December 2011, Mr. Yun said.


The typical home sold in October was on the market for 21 days, up from 19 days from

the prior month, NAR said.


Homes typically go under contract a month or two before the contract closes, so the

October data largely reflect purchase decisions made in September and August.


The average rate on a 30- year fixed-rate mortgage fell to 6.61% this week, housing-finance agency Freddie Mac said Thursday. That was down from 7.08% a week ago, which had been the highest rate in more than a decade, but still up from 3.1% a year earlier.


Mortgage applications for home purchases rose 4% on a seasonally adjusted basis in

the week ended Nov. 11 from the prior week, according to the Mortgage Bankers Association.


Source: WSJ

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