US home sales fell for the ninth straight month in October as rising mortgage rates and high prices pushed buyers out of the market.
Sales of existing homes – which include single-family homes, townhomes, condominiums and co-ops – fell 28.4% in October from a year ago and fell 5.9% from September, according to a National Association of Realtors report released Friday. All US regions saw month-over-month and year-over-year declines.
That continues a downward trend that began in February and marks the longest streak of declining sales on record, dating back to 1999.
Sales in October were at their weakest level since May 2020, when the property market was at a standstill during the pandemic lockdown. Beyond this, sales last month were the weakest since December 2011.
Still, house 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 was down from a record high of $413,800 in June. The price increase marks more than a decade of year-over-year monthly gains.
“More potential home buyers were pushed out of qualifying for a mortgage 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 house price gains in recent years.”
Many homeowners who have recently purchased or refinanced at ultra-low mortgage rates are reluctant to sell. That kept the inventory very low.
At the end of October there were 1.22 million units for sale, down 1% from both last month and last year, according to the report. At the current pace of sales, it would take 3.3 months to go through 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 multiple offers,” Yun added.
While almost a quarter of the houses in October sold above the asking price, houses that remained on the market for more than 120 days saw the prices reduced by 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, up from 19 days in September. Before the pandemic, homes typically sat on the market closer to 30 days. More than half of the homes sold in October were on the market for less than a month.
While prices are still rising year-on-year nationally, the increase is smaller than it has been over the past few years with annual house price appreciation peaking at 24% in May 2021.
And some markets are even seeing prices drop, especially areas that saw a large increase in home price appreciation during the pandemic, Yun said.
Half of the country can expect to see prices drop year over year in the coming months, Yun said, most will be by a modest amount, while other areas will see larger drops. But the other half will likely see a modest increase.
“Affordable areas will hold, places like Indianapolis, where there’s job growth,” he said.
Still, Yun said, nationally, home prices are 40% higher than in October 2019, before the pandemic.
“Household income has not increased by 40%,” he said.
Those struggling to buy their first home continued to foreclose, making up just 28% of transactions last month.
“First time buyers are really struggling with high prices, the high bar to enter the market and high mortgage rates.”
Once the barrier to home ownership improves a bit for buyers — either with falling prices or lower mortgage rates — we could face a housing shortage again, Yun said, because the number of fresh listings entering the market is lower now than a year ago.
Current home owners are not selling and home builders are also slowing home building.
October housing starts, a measure of new home construction, fell 4.2% from September, and were down 8.8% from a year ago, according to the U.S. Census Bureau and Department of Housing and Urban Development of the United States.
“This is why there is a need for more construction of new houses, as well as more rehabilitation of unused buildings into residential units,” said Yun, noting that while the construction of apartment buildings remains robusta, the start of one family is less than a year ago and much less historical. averages.
“Meanwhile, mortgage rates are falling from last month’s highs and the door is opening for more home buyers to qualify for a mortgage.”
