Sales of previously occupied U.S. homes fell for the ninth straight month in October to the slowest pre-pandemic sales pace in more than 10 years, as homebuyers faced a sharp rise in mortgage rates, rising home prices And faced fewer properties on the market.
The National Association of Realtors said Friday that sales of existing homes fell 5.9 percent last month from September to a seasonally adjusted annual rate of 4.43 million. The NAR said this year’s streak of monthly sales declines is the longest on record since 1999 data.
Sales rose 28.4 percent from October last year. Excluding a sharp slowdown in sales that occurred near the start of the pandemic in May 2020, sales are now at their slowest annual pace since December 2011, when the housing market weakened after the foreclosure crisis of the late 2000s. There was still a deep depression.
Despite the slowdown, home prices continued to climb last month, albeit at a slower pace than earlier this year. The national median home price rose 6.6 percent to $379,100 in October from a year earlier.
The median home price is now about 8 percent below its peak in June, but 40 percent higher than where it was in October 2019 before the pandemic, said Lawrence Yun, NAR’s chief economist. According to Pantheon Macroeconomics, house prices have fallen by about 32 percent since January.
“It’s really hurting affordability,” he said. “Most household incomes have not increased by 40 percent.”
Rising mortgage rates
House hunters had fewer properties to choose from as listings of homes on the market fell for the third month in a row. About 1.22 million homes were on the market at the end of October, down 0.8 percent from September, the NAR said.
This equates to a 3.3 month supply at the current monthly sales pace. A more balanced market between buyers and sellers has a 5-6 month supply.
The housing market is slowing as the average long-term U.S. mortgage rate has more than doubled from a year ago, making housing less affordable.
The average rate on a 30-year home loan this week was 6.61 percent, according to mortgage buyer Freddie Mac. A year ago, the average rate was 3.1 percent. Late last month, the average rate rose above 7 percent for the first time since 2002.
“The decline in sales this year has reflected a slowdown in mortgage demand as affordability has deteriorated,” Ian Shepherdson, Pantheon’s chief economist, said in a report. They expect residential property sales to decline further.
Rising home loan rates reduce homebuyers’ purchasing power by adding hundreds of dollars to monthly mortgage payments. They also discourage homeowners who held off on buying a new home at extremely low rates in the past two years. This, in turn, may limit the number of homes available for sale.
Mortgage rates are likely to remain a key hurdle for homebuyers for some time as the Federal Reserve continues to signal its intention to continue raising short-term interest rates to ease the steepest inflation in decades. is given
Two weeks ago, the Fed raised its short-term lending rate for the fourth time this year by another 0.75 percentage points, three times its usual margin. Its key rate is now in the range of 3.75% to 4%.
While mortgage rates don’t necessarily reflect Fed rate hikes, they do track the yield on the 10-year Treasury note. Yields are affected by a variety of factors, including investors’ expectations for future inflation and global demand for US Treasuries.
Competition remains fierce.
With the number of properties on the market still relatively low by historical standards, sellers continue to receive multiple offers, particularly for very affordable homes where competition remains fierce.
On average, homes sold in just 21 days after being on the market last month, up from 19 days in September, NAR said. Before the pandemic, homes typically sold within 30 days of being listed for sale.
For buyers, the ongoing slowdown in the housing market certainly has benefits.
“Other leading indicators of home demand suggest that the housing market is likely to contract further,” Jeffrey Roach, chief economist at LPL Financial, said in an email. “The tight supply of homes, the demographic landscape and continued geographic shifts mean that the housing market is unlikely to repeat the experience of the Great Financial Crisis. As the housing market cools further, median prices should decline. That will help bring the affordability level back up. The rest.”
According to Zillow, the monthly mortgage payment on a typical home purchase in October was $1,910. That’s up 77% from a year ago and up 107% — or nearly $1,000 — from 2019.