Home Sales Drop to a 3.75 Million Pace, the Lowest Since 2010, as Mortgage Rates Squeeze Buyers
Sales of previously owned U.S. homes fell 5.5% in October to a seasonally adjusted annual pace of 3.75 million, the lowest since August 2010, the National Association of Realtors said Thursday.
Sales were down 8.8% from a year earlier. The median sales price rose just 0.4% to $416,700, a record for the month of October.
“Home buying is difficult when mortgage rates have climbed to their highest levels since 2000, aside from a single month in 2023,” said NAR chief economist Lawrence Yun.
Unsold inventory rose to 1.59 million homes, equal to a 5.1-month supply. Sales dropped in the Midwest, South and West and held steady in the Northeast, while all four regions fell from a year ago.
The decline hit every price tier, even homes priced at $1 million and up, which had held up until now, Realtor.com reported. Inventory reached a seven-year high, and the months of supply hit an 11-year high.
First-time buyers made up 29% of sales, down from 31% in September. All-cash purchases rose to 29%, helped by the equity longtime owners have built up.
“It was a punch in the gut,” Joel Berner, senior economist at Realtor.com, told NPR. “We expected to see a soft month but not the softest month since 2010.”
Rates are easing, slowly
The 30-year fixed mortgage averaged 7.11% this week, down for a fourth straight week and the lowest in seven weeks, Freddie Mac said Thursday. A year ago, it averaged 6.24%.
“Mortgage rates dropped to their lowest level in seven weeks, a welcome development that gives borrowers greater flexibility as they navigate the current housing market,” said Sam Khater, Freddie Mac’s chief economist.
The rate averaged 7.33% in October and hit a three-year high of 7.40% on Oct. 8, according to Freddie Mac figures cited by Realtor.com.
The weak October numbers were foreshadowed by a sharp drop in pending sales in September, TD Economics said. It expects sales to stay very weak in the near term and sees rates easing toward 6% only gradually.
Realtor.com chief economist Danielle Hale said sales will likely stay near longtime lows for the next few months, but she does not see it as the new normal.
“Several factors are likely to put a floor under how low rates can go, including a strong economy and jobs market, persistent inflation, and an expected need for tighter monetary policy in the near term,” Hale said.
Yun pointed to a possible upside. “Based on the current underwhelming home sales pace at a time of consistent job growth, there could be sizable pent-up demand if mortgage rates decline,” he said.
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