- Home sales fell to a 13-year low in October, due to high mortgage rates pricing buyers out of the market.
- Prices rose to their highest ever for the month of October, due to low inventory spurring fierce competition among the remaining buyers.
- Since October, interest rates have fallen, offering hope that affordability will improve and sales will pick up in the coming months.
High mortgage rates worsened the housing market’s gridlock in October, pushing the pace of home sales down to its lowest in more than a decade.?
Home sales fell 4.1% from September to a seasonally-adjusted annual rate of 3.79 million, the National Association of Realtors said Tuesday. That was the slowest pace of sales since 2010. The slowdown was more than twice as steep as the 1.5% drop forecasters had expected, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.
The report highlighted how much tougher homebuying has become because of high mortgage rates. The average rate offered for a 30-year mortgage hit 7.79% in late October—its highest since 2000 according to Freddie Mac—because of the Federal Reserve’s campaign of anti-inflation rate hikes. The spike in rates since 2021’s all-time low has added hundreds to monthly mortgage payments, making buying a house unaffordable for all but well-off buyers.
At the same time, sellers have been reluctant to give up low mortgage rates they secured over the last few years, keeping the for-sale inventory low—the 1.15 million homes on the market in October were less than half the pre-pandemic average.
Competition has been stiff for what few homes remain on the market, driving prices up. The median home sold for $391,800 in October, the highest ever for that month and a 3.4% increase from October 2022. Home price trends are usually compared year-to-year because they’re seasonal, tending to peak in the summer buying season and hit lows in the dead of winter each year.
“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” Lawrence Yun, chief economist at the association, said in a prepared statement.
The housing market is on pace to have its worst year for sales since 2010, or possibly even since 1992 or 1993, Yun said.
However, since October, mortgage rates have fallen amid indications that the Fed is done raising its influential benchmark interest rate. That means homebuying will likely get more affordable in the coming months, Yun said. The 30-year rate fell for a third week in a row last week, hitting 7.44%, according to Freddie Mac.
Correction—The article has been updated after publication to state that the pace of home sales in October put it on pace to have its worst year since 2010, or before that, the early 1990s.