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U.S. existing home sales slowed for the ninth straight month in October as rising mortgage rates, surging inflation and steep home prices drained consumer demand.
Sales of previously owned homes tumbled 5.9% in October from the prior month to an annual rate of 4.43 million units, according to new data released Friday by the National Association of Realtors (NAR). That is slightly better than what economists were expecting, according to Refinitiv.
On an annual basis, home sales plunged 28.4% in October.
"More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher," NAR chief economist Lawrence Yun said in a statement. "The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years."
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Houses in the Harris Ranch community of Boise, Idaho, US, on Friday, July 1, 2022. (Jeremy Erickson/Bloomberg via Getty Images / Getty Images)
There were about 1.22 million homes for sale at the end of October, according to the report, a decline of 0.8% from both September and last year. Homes sold on average in just 21 days, up from 19 days in September. Before the pandemic, homes typically sat on the market for about a month before being sold.
"Inventory levels are still tight, which is why some homes for sale are still receiving multiple offers," Yun said. "In October, 24% of homes received over the asking price. Conversely, homes sitting on the market for more than 120 days saw prices reduced by an average of 15.8%."
At the current pace of sales, it would take roughly 3.3 months to exhaust the inventory of existing homes. Experts view a pace of six to seven months as a healthy level.
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The interest rate-sensitive housing market has borne the brunt of the Federal Reserve's aggressive campaign to tighten policy and slow the economy.
Policymakers already lifted the benchmark federal funds rate six consecutive times — including four 75-basis-point increases in June, July, September and November — and have shown no sign of pausing as they try to crush inflation that is still running near a 40-year high.
A "For Sale" outside a house in Hercules, California, US, on Tuesday, May 31, 2022. (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
The average rate for a 30-year fixed mortgage fell to 6.61% this week, according to the latest data released Thursday from mortgage lender Freddie Mac. That is significantly higher than just one year ago when rates stood at 3.10%, although it's down from a peak of 7.08%.
But even with higher interest rates putting homeownership out of reach for millions of Americans, prices are still steeper than just one year ago. The median price of an existing home sold in September was $379,100, a 6.6% increase from the same time a year ago. This marks the 128th consecutive month of year-over-year home price increases, the longest-running streak on record.
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However, prices did decline slightly from the high of $413,800 recorded in June, part of a usual trend of prices declining after peaking in the early summer.