A recent report by the National Association of Realtors revealed that existing home sales in the United States reached their lowest level in over 13 years in October. This decline can be attributed to a combination of soaring mortgage rates and a scarcity of available housing options.
The data showed that existing home sales dropped by 4.1% last month, resulting in a seasonally adjusted annual rate of 3.79 million units. This marks the lowest level since August 2010. Economists had initially predicted a less dramatic decrease, estimating a sales rate of 3.90 million units.
The Northeast, West, and densely populated South experienced the greatest decline in home sales, while the Midwest remained unchanged. Lawrence Yun, Chief Economist at the NAR, stated that prospective buyers faced significant challenges due to a persistently limited housing inventory and mortgage rates that have reached their highest levels in two decades.
With the average rate on a 30-year fixed-rate mortgage peaking at 7.79% in late October – the highest level since November 2000, home buyers have been deterred from entering the market. Although mortgage rates have since decreased, remaining at 7.44% last week, the impact of the peak rates in October still lingers.
Furthermore, the report revealed that the number of previously owned homes available for sale decreased by 5.7% compared to the previous year. As a result, the current inventory of existing homes would take 3.6 months to exhaust at the current sales pace, slightly higher than the 3.3 months recorded a year ago.
Real estate experts consider a four-to-seven-month supply as a healthy balance between supply and demand. With limited supply, many areas witnessed multiple offers on properties, which further contributed to the upward trend in house prices. The median price of existing houses increased by 3.4% to $391,800 in October compared to the same period last year.
Additionally, the report highlighted that properties typically stayed on the market for 23 days in October, compared to 21 days a year ago. Despite these challenging market conditions, first-time buyers remained consistent, accounting for 28% of sales. However, this share falls short of the 40% threshold believed to be necessary for a robust housing market.
Moreover, all-cash sales represented 29% of transactions, a slight increase from the previous year. Distressed sales, including foreclosures, remained relatively minimal, making up only 2% of transactions, consistent with the prior year.
1. What caused the decline in U.S. existing home sales in October?
The decline in existing home sales can be attributed to the highest mortgage rates in two decades and a shortage of available houses.
2. Which regions of the United States were most affected by the decline in home sales?
The Northeast, West, and densely populated South experienced the greatest decline in home sales.
3. How have mortgage rates impacted the housing market?
The average rate on a 30-year fixed-rate mortgage reached its highest level since November 2000 in late October, deterring potential homebuyers from entering the market.
4. Is the current housing inventory sufficient to meet demand?
The current inventory of existing homes would take 3.6 months to exhaust at the current sales pace, slightly higher than the previous year. A four-to-seven-month supply is considered a healthy balance between supply and demand.
5. How did house prices change in October?
The median price of existing houses increased by 3.4% to $391,800 in October compared to the same period last year.