Sales of previously owned homes were 4.1% lower in October compared with September and ran at a seasonally adjusted annual rate of 3.79 million units, according to the National Association of Realtors.
That was the slowest sales pace since August 2010. Analysts had expected a smaller decline to 3.9 million units. Sales fell 14.6% year-on-year.
October sales are based on closings from contracts likely signed in August and September. The average rate on the 30-year fixed mortgage had fallen to nearly 7% in late August, but then began to rise sharply, jumping above 8% in mid-October. Prices have since fallen somewhat.
“Prospective homebuyers experienced another difficult month due to the persistent shortage of home inventory and the highest mortgage rates in a generation,” said Lawrence Yun, NAR’s chief economist. “However, there are still more offers, especially on starter and mid-priced homes, although price concessions are taking place at the upper end of the market.”
At the end of October, there were 1.15 million homes for sale, down 5.7% from a year earlier. This is approximately half as many homes as were available for sale before Covid. At the current pace of sales, that represents a 3.6-month supply. a six-month supply is considered a balanced market between buyer and seller.
The tight supply kept the pressure down on prices. The median price for an existing home sold in October was $391,800, up 3.4% from a year ago ($378,800). Prices rose in all parts of the country. These annual price increases have been larger for four consecutive months. Approximately 28% of the homes sold above list price.
“While conditions for buyers remain tight, home sellers have fared 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 home equity over the past three years.”
Sales fell in all price categories up to $750,000, but there was an increase in sales of higher end homes. Homes priced over $1 million rose just over 9% from a year ago. Wealthy buyers either tend not to use mortgages or are less sensitive to monthly interest rate changes. Yun also noted that there are more homes available for sale at the higher end of the market.
First-time buyers represented 28% of sales in October, unchanged from a year ago and still significantly lower than the 40% they have historically represented. Individual investors bought 15% of homes, down from 18% in September and 16% from a year ago. Cash deals accounted for 29% of sales compared to 26% in October 2022.