Home sales in the United States fell for the ninth straight month in October as rising mortgage rates and high prices pushed buyers out of the market.
Existing home sales — which include single-family homes, townhomes, condos and co-ops — fell 28.4% year over year and 5.9% from September in October, according to a National Association of Realtors report released on Friday. All regions of the United States saw monthly and annual declines.
This continues a slowing trend that began in February and represents the longest streak of declines in sales on record, dating back to 1999.
October sales were at their weakest levels since May 2020, when the housing market stalled during the pandemic lockdowns. Additionally, last month’s sales were the weakest since December 2011.
Nonetheless, home prices have continued to rise over the past month. According to the report, the average home price in October was $379,100, up 6.6% from a year ago. But that’s down from June’s all-time high of $413,800. The price surge marks more than a decade of monthly year-over-year gains.
“More prospective homebuyers were forced out of mortgage eligibility in October as mortgage rates climbed higher,” said Lawrence Yun, NAR’s chief economist. “The impact is greater in expensive areas of the country and in markets that have seen significant home price increases in recent years.”
Many homeowners who recently bought or refinanced into ultra-low mortgage rates are reluctant to sell. That has kept inventory painfully low.
According to the report, 1.22 million units were for sale at the end of October, down less than 1% from last month and last year. At the current pace of selling, it would take 3.3 months to use up existing inventory, up from 3.1 months in September and 2.4 months last year. But that’s still historically low: A balanced market is 4 to 6 months of supply.
“Stocks are still tight, which is why some homes for sale are still getting multiple offers,” Yun added.
While nearly a quarter of homes sold above asking price in October, prices for homes that had been on the market for more than 120 days fell about 16%.
With fewer buyers buying homes, the average time a home stays on the market is getting longer.
Properties were typically on the market for 21 days in October versus 19 days in September. Before the pandemic, homes were typically closer to 30 days on the market. More than half of the homes sold in October have been on the market for less than a month.
While prices are rising year on year across the country, the increase is slower than in recent years, with annual home price increases peaking at 24% in May 2021.
And some markets are even seeing price declines, particularly in areas that have seen huge surges in house prices during the pandemic, Yun said.
Half of the country can expect prices to fall year after year in the coming months, Yun said, most will be by a modest amount while other areas will see larger falls. But the other half will likely see a modest increase.
“Affordable areas will hold up, places like Indianapolis where there’s job growth,” he said.
Still, Yun said, house prices nationwide are 40% higher than in October 2019 before the pandemic.
“Household incomes have not increased by 40%,” he said.
Those who struggled to buy their first home continued to be excluded, accounting for just 28% of transactions over the past month.
“First-time buyers really struggle with high prices, the high bar to enter and high mortgage rates.”
Once the barrier to home acquisition for buyers improves somewhat — either with falling prices or lower mortgage rates — we could face another housing shortage, Yun said, as the number of new listings entering the market is fewer now than it was before Year.
Current homeowners are not selling and home builders are also slowing down house building.
According to the US Census Bureau and the US Department of Housing and Urban Development, October housing starts, a measure of new housing construction, fell 4.2% from September and 8.8% from a year ago.
“Therefore, more housing construction is needed, as well as more rehabilitation of disused buildings into residential units,” Yun said, noting that while multifamily construction remains robust, single-family housing starts are down from a year ago and well below historical averages .
“In the meantime, mortgage rates fall from last month’s peaks and the gate opens for more homebuyers to qualify for a mortgage.”