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
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.