Home sales fell for the ninth month in a row in October

Existing home sales fell 5.9 percent in October, down 28.4 percent year-on-year

Home sales fell for a ninth straight month in October as higher interest rates and rising inflation kept buyers on the sidelines.

Existing home sales fell 5.9% between September and October, according to the National Association of Realtors. That’s the lowest rate since December 2011, except for a very brief drop at the start of the Covid-19 pandemic.

The October reading put sales at a seasonally adjusted annualized pace of 4.43 million units. Sales were 28.4% lower year over year.

Although sales are slow, supply is still stubbornly low. At the end of October, there were 1.22 million homes for sale, down just under 1% both month-on-month and year-on-year. That’s a supply for 3.3 months at the current sales rate. Historically, a balanced market is considered a six-month supply.

The median price of an existing home sold in October was $379,100, up 6.6% from the previous year. However, price gains are dwindling as the seasonal fall in house prices appears to be much deeper than usual at this time of year.

“Inventory levels are still tight, which is why some homes for sale are still getting multiple offers,” said Lawrence Yun, NAR chief economist. “In October, 24% of homes were sold above the asking price. Conversely, homes that had been on the market for more than 120 days were reduced in price by an average of 15.8%.”

A “For Sale” sign outside a home in Albany, California, on Tuesday, May 31, 2022.

David Paul Morris | Bloomberg | Getty Images

Overall, homes went on contract in 21 days in October, up from 19 days in September and 18 days in October 2021. More than half, 64%, of homes sold in October 2022 were on the market for less than a month market, suggesting there is still strong demand if the home is priced right.

While sales are now down in all price ranges, they are weakening the most in the $100,000 to $250,000 range and in the $1 million plus range. At the lower end, this is probably due to the large shortage of available homes in that price range. Large losses in the stock market, but also inflation and global economic uncertainty can weigh on high-end buyers.

New buyers, probably the most sensitive to the rise in mortgage rates, made up only 28% of sales, up from 29% the year before. This cohort usually makes up 40% of home purchases. Investors or second home buyers pulled out, buying just 16% of homes sold in October, compared to 17% in October 2021.

Mortgage rates are now more than double the record lows set at the beginning of this year. But the recent volatility in rates is also wreaking havoc with potential buyers. Rates shot up in June, stabilized in July and August, and even continued to rise in September and October. Then they fell back quite sharply last week.

“For many, the week-to-week volatility in mortgage rates alone, which was three times normal in 2022, may be a good reason to wait,” said Danielle Hale, chief economist at Realtor.com. “With week-to-week changes in mortgage rates causing $100+ swings in monthly housing costs for a mid-price home, it’s hard to know how to set a budget and stick to it.”

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