October witnessed a dip in home sales, hitting a 13-year low due to soaring interest rates and home prices. Affordability struggles, marked by the lowest levels in decades, are sidelining potential buyers. Economist predictions suggest that 2023 might see the lowest existing home sales since 2011.
The National Association of Realtors reported a 4.1% decline in existing home sales in October, reaching a seasonally adjusted annual rate of 3.79 million, the lowest since August 2010. Compared to the previous year, October sales plummeted by 14.6%.
Despite weakened demand, low housing inventory persists, with homeowners reluctant to sell and move amid fears of losing their current low interest rates. This scarcity contributes significantly to the ongoing rise in home prices across the United States.
In October, the national median existing home price surged by 3.4% year-over-year, reaching $391,800, marking the highest October price since 1999, without adjusting for inflation.
“Lack of inventory along with higher mortgage rates are really hindering home sales,”
according to Lawrence Yun, NAR’s chief economist.
The slowdown in the housing market this year is because of the effort by the Federal Reserve to cool down the economy and curb inflation. They are achieving it by raising the benchmark rate to a massive 22-year high. The last rise was in July. The officials have kept a pause in rate increase ever since. But they will expectedly do it again in the coming month.
Economists surveyed by The Wall Street Journal had estimated that sales of homes owned previously by others fell by 1.5% in October compared to the month before.
Mortgage rates also jumped to a fresh two-decade high this fall before going down in recent weeks.
Homes usually go under contract one or two months before the contracts close. So, the October data is a reflection of August and September. Mortgage rates have lowered since late October. And the buyers might have already thought of pausing their home search until the holiday season is over — according to Danielle Hale (Chief Economist at Realtor.Com).
“The surge in rates in October might have caused a lot of households to sort of end their home search for 2023,”
she said.
“At this point, they might just wait until the spring.”
Nationally, 1.15 million homes were under sale or under contract during late October. It was 1.8% from September and down by 5.7% from October 2022, according to NAR. It was the lowest since 1999, according to Yun.
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