US home sales fall to a 16-year low as mortgage rates bite
Existing-home sales fell 5.5% in October to 3.75 million, the lowest since August 2010, as mortgage rates above 7% pushed buyers to the sidelines.
Sales fall to the lowest since 2010
US existing-home sales fell to the lowest level in more than 16 years in October as rising mortgage rates and still-elevated house prices pushed potential buyers to the sidelines. Sales dropped 5.5% last month to a seasonally adjusted annual rate of 3.75 million units, the National Association of Realtors said on Thursday.
That was the lowest level since August 2010, when sales were declining after the end of a homebuyers tax credit. Economists polled by Reuters had forecast resales falling to a 3.85 million unit rate, and sales were down 8.8% from a year earlier. "Home buying is difficult when mortgage rates have climbed to their highest levels since 2000, aside from a single month in 2023," said Lawrence Yun, the association's chief economist.
Mortgage rates are the squeeze
The 30-year fixed mortgage rate jumped above 7% in late August, rising to 7.40% by mid-September, for a total increase of 142 basis points since the United States and Israel attacked Iran at the end of February, according to data from mortgage finance agency Freddie Mac. It averaged 7.18% last week, down from 7.24% in the prior week.
Home sales are counted at the closing of a contract, so last month's sales likely reflected contracts signed in August and September, when rates were at their highest. Sales dropped in the South, Midwest and West regions, and were unchanged in the Northeast.
- Existing-home sales3.75 million, down 5.5%
- Year over yearDown 8.8%
- Forecast3.85 million
- Inventory1.590 million units, up 1.3%
- Months of supply5.1, most since November 2015
More homes for sale, fewer buyers
Existing housing inventory increased 1.3% to 1.590 million units. Supply rose 4.6% from a year ago, and at October's sales pace it would take 5.1 months to exhaust the current inventory, the most since November 2015. That was up from 4.7 months in September and 4.4 months a year ago.
First-time buyers accounted for 29% of sales, down from 31% in September and 32% a year ago. The median number of days a home spent on the market increased to 35 from 33 in September. The median price still rose from a year earlier, reaching the highest level for any October, even as the number of transactions fell.
What comes next
Rates have eased slightly in recent weeks, with the 30-year fixed rate averaging 7.18% last week, down from 7.24% the week before. Whether that is enough to bring buyers back depends on how long rates stay near current levels and on whether sellers accept lower prices.
Cash transactions rose to 29% of sales from 27% in September, while distressed sales, including foreclosures, were unchanged at 2%. Individual investors or second-home buyers accounted for 20% of transactions, unchanged from September but up from 16% a year ago.
