Home sales fell for the ninth straight month in October, as rising mortgage rates spooked potential buyers

Home sales fell for the ninth straight month in October as rising interest rates and rising inflation kept buyers on the sidelines.

Previously owned home sales fell 5.9% from September to October, according to the National Association of Realtors. This is the slowest pace since December 2011, barring a very brief drop at the start of the Covid-19 pandemic.

The October reading put sales at a seasonally adjusted annual pace of 4.43 million units. Sales were down 28.4% year over year.

Even with sales slowing, supply remains stubbornly low. There were 1.22 million homes for sale at the end of October, down just under 1% month over month and year over year. That’s a 3.3 month supply at the current sales pace. Historically, a equilibrium market is a six-month supply.

The median price of an existing home sold in October was $379,100, up 6.6% from the previous year. However, the price gains are tapering off, as the seasonal decline in home prices this time of year appears to be much deeper than usual.

“Inventory levels remain tight, which is why some homes for sale are still receiving multiple offers,” said Lawrence Yoon, chief economist at NAR. “In October, 24% of homes received their asking price. Conversely, homes that had been on the market for more than 120 days experienced an average price drop of 15.8%.”

A “For Sale” sign outside a home in Albany, Calif., on Tuesday, May 31, 2022.

David Paul Morris | bloomberg | Getty Images

Overall, homes were entered on contract in 21 days in October, up from 19 days in September and 18 days in October 2021. More than half of homes sold in October 2022, 64%, had been on the market for less than a month, indicating So there is still strong demand if the home is priced correctly.

While sales are now declining across all price points, they are weakening most in the $100,000 to $250,000 range and in the over $1 million range. It’s on the lower end, likely due to the severe shortage of homes available in this price range. Large losses in the stock market, as well as inflation and global economic uncertainty, may be weighing on high-end buyers.

First-time buyers, who are likely to be more sensitive to increases in mortgage rates, made up just 28% of sales, down from 29% a year earlier. This group typically makes up 40% of home purchases. Investors, or second home buyers, fell back, buying just 16% of homes sold in October compared to 17% in October 2021.

Mortgage rates are now more than double the record lows seen only at the beginning of this year. But the recent fluctuations in interest rates have also wreaked havoc on potential buyers. Prices rose in June, stabilized in July and August, and continued to rise in September and October. Then they fell sharply again last week.

“For many, the weekly volatility in mortgage rates alone, which in 2022 was three times what was typical, may be a good reason to wait,” said Danielle Hill, chief economist at Realtor.com. “With week-to-week changes in mortgage rates causing fluctuations of more than $100 in monthly housing costs for a median-priced home, it’s hard to know how to set and stick to a budget.”

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