U.S. existing home sales continued to slide in October as a combination of steep mortgage rates and a worsening supply shortage squeezed would-be homebuyers.
Sales of previously owned homes fell 4.1% in October from the previous month to an annual rate of 3.79 million units, according to new data released Tuesday by the National Association of Realtors (NAR). It marked the slowest pace of sales since August 2010.
On an annual basis, existing home sales are down 14.6% when compared with October 2022.
"Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation," said Lawrence Yun, NAR’s chief economist. "Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market."
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There were about 1.15 million homes for sale at the end of October, according to the report, up 1.8% from the previous month but down 5.7% from the same time one year ago.
The decline in inventory helped to drive prices higher last month. The median price of an existing home sold in October was about $391,800 – up 3.4% from one year ago.
"While circumstances for buyers remain tight, home sellers have done well as prices continue to rise year-over-year, including a new all-time high for the month of October," Yun said. "In fact, a typical homeowner has accumulated more than $100,000 in housing wealth over the past three years."
Homes sold on average in just 23 days last month. While that is down slightly from the 14 days recorded in July 2022, it marks a major increase from prior years. Before the COVID-19 pandemic, homes typically sat on the market for about a month before being sold.
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At the current pace of sales, it would take roughly 3.6 months to exhaust the inventory of existing homes. Experts view a pace of six to seven months as a healthy level.
The supply crunch is largely being driven by the astronomical rise in mortgage rates over the past year. Rates are expected to remain elevated, as the Federal Reserve has hinted that it may hold interest rates at peak levels for longer than previously anticipated.
Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell with rates continuing to hover near a two-decade-high, leaving few options for eager would-be buyers.
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"Existing home sales fell in October to the lowest level since 2010 as the housing market remains paralyzed by high mortgage rates," said Daniel Vielhaber, Nationwide economist. "The combination of high mortgage rates and what should be slow job growth due to a mild economic downturn is expected to keep the market for existing homes stifled through much, if not all, of the first half of 2024."
