US home sales fell for the ninth consecutive month in October, as rising mortgage rates and rising prices pushed buyers out of the market.
Existing home sales — which include single-family homes, townhouses, condominiums and co-ops — were down 28.4% in October from a year ago, and down 5.9% from September, according to a National Association of Realtors report released Friday. All regions of the United States experienced both a month-over-month and year-over-year decline.
This continues a slowing trend that began in February and marks the longest streak of declining sales on record, since 1999.
Sales in October were at their weakest level since May 2020, when the real estate market was at a standstill during pandemic lockdowns. Moreover, last month’s sales were the weakest since December 2011.
However, housing prices continued to rise last month. The median home price was $379,100 in October, up 6.6% from a year ago, according to the report. But that’s less than the record high of $413,800 in June. The price increase indicates more than a decade of month-on-year gains.
“More potential homebuyers were pushed out of qualifying for a mortgage in October as mortgage rates soared,” said Lawrence Yoon, chief economist at NAR. “The impact is greatest in expensive areas of the country and in markets that have seen large home price gains in recent years.”
Many homeowners who have recently purchased or refinanced with extremely low mortgage rates are reluctant to sell. This has kept inventory agonizingly low.
At the end of October, there were 1.22 million units for sale, down less than 1% from both last month and last year, according to the report. At its current sales pace, it would take 3.3 months to outpace existing inventory, up from 3.1 months in September and 2.4 months last year. But this is still historically low: A balanced market is a 4- to 6-month supply.
“Inventory levels are still tight, which is why some homes for sale are still receiving many offers,” Yoon added.
While nearly a quarter of homes were sold in October at the asking price, homes that have been on the market for more than 120 days have seen their prices drop by about 16%.
With fewer buyers shopping for homes, the average time a home spends on the market is increasing.
Properties were typically on the market for 21 days in October, up from 19 days in September. Pre-pandemic, homes are usually on the market for approximately 30 days. More than half of the homes sold in October have been on the market for less than a month.
While prices are still rising year over year nationally, the increase is less than in the past two years, with annual home price increases peaking at 24% in May 2021.
Some markets are even seeing prices drop, Yoon said, especially areas that have seen a significant increase in house prices during the pandemic.
Yoon said half of the country can expect to see prices drop year-on-year in the coming months, most of which will be by a modest amount, while other regions will see a larger drop. But the other half is likely to see a modest increase.
“Affordable areas will continue, in places like Indianapolis, where there is job growth,” he said.
However, nationally, Yoon said, home prices are 40% higher than they were in October 2019, before the pandemic hit.
“Family income has not increased by 40%,” he said.
Those struggling to buy their first home have continued to close, making up just 28% of transactions last month.
“First time buyers are really struggling with the high prices, high standards of entry into the market and high mortgage rates.”
Once the homeownership hurdle improves a bit for buyers — either with lower prices or lower mortgage rates — we may again face a housing shortage, Yoon said, because there are fewer new listings coming to the market now than there were a year ago.
Existing homeowners aren’t selling, and homeowners are slowing home construction, too.
October housing starts, a measure of new home construction, were down 4.2% from September and down 8.8% from a year ago, according to the US Census Bureau and the US Department of Housing and Urban Development.
“This is why more new home construction is needed, as well as more rehabilitation of abandoned buildings into condominiums,” Yoon said, noting that while apartment building construction remains strong, single-family starts are less than a year ago. And much less history. averages.
“In the meantime, Mortgage rates are falling from peak levels last month and the gate is opening for more homebuyers to qualify for a mortgage.”