Home sales in the United States declined for the ninth month in a row in October as surging 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 — 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 saw month-over-month and year-over-year declines.
That continues a slowing trend that began in February and marks the longest streak of declining sales on record, going back to 1999.
Sales in October were at their weakest level since May 2020, when the real estate market was at a standstill during the pandemic lockdowns. Beyond that, sales last month were the weakest they have been since December 2011.
Still, home prices continued to climb last month. The median home price was $379,100 in October, up 6.6% from one year ago, according to the report. But that’s down from the record high of $413,800 in June. The price increase marks more than a decade of year-over-year monthly gains.
“More potential homebuyers were squeezed out from 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 witnessed significant home price gains 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.
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 the current sales pace, it would take 3.3 months to get through the 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 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 nearly a quarter of homes in October sold over the asking price, homes sitting on the market for more than 120 days saw prices reduced by about 16%.
With fewer buyers shopping for 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. Pre-pandemic, homes typically sat on the market closer to 30 days. About half the homes sold in October were on the market for less than a month.
While prices are still climbing year over year nationally, the increase is smaller than it has been over the past couple years with annual home price appreciation peaking at 24% in May 2021.
And some markets are even seeing prices drop, especially areas that saw a huge increase in home price appreciation during the pandemic, Yun said.
Half the country can expect to see prices decline year over year in the months ahead, Yun said, most will be by a modest amount, while other areas will see bigger drops. But the other half will likely see a modest increase.
“Affordable areas will hold on, places like Indianapolis, where there is job growth,” he said.
Still, Yun said, nationally, home prices are 40% higher than in October 2019, prior to the pandemic.
“Household incomes have not risen by 40%,” he said.
Those struggling to buy their first home continued to be shut out, making up only 28% of transactions last month.
“First-time buyers are really struggling with high prices, the high bar to get into the market and high mortgage rates.”
Once the hurdle to homeownership improves a bit for buyers — either with falling prices or lower mortgage rates — we could again face a housing shortage, Yun said, because the number of fresh listings coming to market is lower now than a year ago.
Current homeowners aren’t selling and homebuilders are slowing home construction, too.
October housing starts, a measure of new home construction, dropped 4.2% from September, and were 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 disused buildings into residential units,” said Yun, noting that while construction of apartment buildings remains robust, single-family starts are below one year ago and well below historical averages.
“In the meantime, mortgage rates are falling from the peak levels of last month and the gate is opening for more homebuyers to qualify for a mortgage.”