Home sales fell to a 13-year low in October as prices rose

Sales of previously owned homes fell 4.1% in October compared to September, at a seasonally adjusted annual rate of 3.79 million units, according to the National Association of Realtors.

This was the slowest sales pace since August 2010. Analysts had expected a smaller decline to 3.9 million units. Sales fell by 14.6% year-on-year.

The number of October sales is based on closings from contracts likely to be signed in August and September. The average interest rate on a thirty-year fixed mortgage fell to nearly 7% by the end of August, but then began to rise sharply, jumping above 8% by mid-October. Prices have since fallen somewhat.

“Prospective homebuyers have had another tough month due to a persistent shortage of housing inventory and the highest mortgage rates in a generation,” said Lawrence Yun, chief economist at NAR. “However, there are still multiple offers, especially on prime and mid-priced homes, even as price concessions occur at the upper end of the market.”

At the end of October, there were 1.15 million homes for sale, down 5.7% from the previous year. This represents about half the number of homes that were available for sale before Covid. At the current sales rate, that represents a 3.6-month supply. A six-month supply is a balanced market between buyer and seller.

The shortage in supply kept pressure on prices. The median price of an existing home sold in October was $391,800, an increase of 3.4% from a year ago ($378,800). Prices rose in all regions of the country. These annual price increases have remained larger for four consecutive months. Nearly 28% of homes sold are above list price.

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“Although conditions for buyers remain challenging, home sellers have performed well with prices continuing to rise year-over-year, including a new all-time high for October,” Yoon said. “In fact, the typical homeowner has accumulated more than $100,000 in housing wealth over the past three years.”

Sales decreased in all price brackets up to $750,000, but there was an increase in high-end home sales. Prices for homes priced over $1 million are up just over 9% over the past year. Wealthier buyers tend not to use mortgages or are less sensitive to monthly price changes. Yoon also noted that there are more homes available for sale at the higher end of the market.

First-time buyers account for 28% of October sales, unchanged from a year ago, and still well below the 40% share they have historically represented. Individual investors bought 15% of homes, down from 18% in September and 16% from a year ago. All-cash transactions accounted for 29% of sales, up from 26% in October 2022.

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