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Washington: US existing home sales posted a record decline for the ninth consecutive month in October, as 30-year fixed mortgage rates hit a 20-year high and prices remained high, putting them out of reach for many Americans.
Despite the massive decline in sales reported by National Association of Realtors On Friday, housing supply remained tight, with significantly fewer homes coming on the market than last year. The housing market has been hit hardest by aggressive Federal Reserve interest rate hikes aimed at reducing high inflation by reducing demand in the economy.
“The combination of rising home prices and mortgage rates has reduced housing affordability,” said Daniel Wilhaber, an economist at Nationwide in Columbus, Ohio. “The decline in strength is in part by design. The Fed’s goal of slowing economic demand by raising interest rates triggers home sales.”
Existing home sales fell 5.9% last month to a seasonally adjusted annual rate of 4.43 million units. This was the lowest level since December 2011, outside the decline during the early phase of the COVID-19 pandemic in the spring of 2020.
Economists polled by Reuters had forecast home sales would fall by 4.38 million units.
House resales, which make up a large portion of US home sales, fell 28.4% in October on a year-over-year basis. This was the biggest decline since February 2008.
The report followed on the heels of news Thursday that single-family homebuilding and permits for future construction fell to their lowest levels since May 2020. Housing inventory also declined.
The 30-year fixed mortgage rate exceeded 7% in October for the first time since 2002, according to data from mortgage finance agency Freddie Mac. The rate averaged 6.61% in the latest week. The US central bank’s rate-hike cycle since the 1980s has raised recession risks.
A separate report from the Conference Board on Friday showed the leading indicator, which is a gauge of future US economic activity, declined 0.8% in October after falling 0.5% in September. The index has now declined for eight consecutive months.
“The trajectory of growth continues to look weak,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina. “A worsening housing market, rising inflation and an aggressive Fed put the economy in a precarious position for 2023.”
Wall Street stocks soared. The dollar was stable against a basket of currencies. US Treasury prices fell.
multiple offer
Existing home sales declined sharply in all four regions. Sales have also declined across all price points on a year-on-year basis. Even as demand weakens, housing supply remains tight, limiting the deceleration in housing price inflation.
The median existing home price rose 6.6% from a year earlier to $379,100 in October. Year-to-date home prices recorded 128 consecutive months of growth, the longest such streak on record. Although price growth has slowed from the June peak, in line with general trends, the NAR estimated that prices in October were well above their pre-pandemic levels.
The Realtor Group also pointed out that multiple offers continued in some areas and that 24% of homes sold last month were above the asking price, reflecting a still-tight inventory environment. On the other hand, prices for unsold homes decreased by an average of 15.8% after more than 120 days.
There were 1.22 million previously owned homes on the market, down 0.8% from both September and a year earlier.
New listings were down about 10% to 20% in most areas compared to October 2021. High borrowing costs are discouraging homeowners, who typically want to downsize or upgrade, from putting their homes on the market.
At October’s sales pace, it will take 3.3 months to liquidate the existing inventory of existing homes, up from 2.4 months a year ago. This increase was mostly due to fewer buyers being in the market. Four to seven months’ supply is seen as a healthy balance between supply and demand.
Properties typically remained on the market for 21 days last month, up from 19 days in September. Sixty-four percent of homes sold in October 2022 had been on the market for less than a month.
First-time buyers were up 28%, compared to 29% in September and a year earlier. All-cash sales accounted for 26% of transactions, up from 24% a year earlier.
“The recent decline in mortgage rates may provide some relief in the coming months, but affordability challenges remain top of mind, as home values strengthen,” said Nicole Bachaud, senior economist at Zillow in Seattle.
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