David Paul Morris | Bloomberg | Getty Images Home sales fell for a ninth straight month in October as higher interest rates and rising inflation kept buyers on the sidelines. Previously owned home sales fell 5.9% from September to October, according to the National Association of Realtors. This is the slowest rate since December 2011, with the exception of a very brief dip at the start of the Covid-19 pandemic. The October measure put sales at a seasonally adjusted, annual pace of 4.43 million units. Sales were 28.4% lower year-over-year. Although sales are slow, supply is still stubbornly low. There were 1.22 million homes for sale at the end of October, a decrease of just under 1% both month-over-month and year-over-year. This is a 3.3 month supply at the current sales rate. Historically, a balanced market is considered a six-month supply.
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The median price of an existing home sold in October was $379,100, up 6.6% from a year earlier. Price gains are shrinking, however, as the seasonal decline in home prices this season appears to be much larger than usual. “Inventory levels are still tight, so some homes for sale are still receiving multiple offers,” said Lawrence Yun, chief economist for NAR. “In October, 24% of homes fetched more than their asking price. In contrast, homes on the market for more than 120 days saw prices drop by an average of 15.8%. Overall, homes went under 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, which which suggests there is still strong demand if the home is priced right. While sales are now falling at all price points, they are weakening the most in the $100,000 to $250,000 range and the $1 million plus range. At the lower end, this is likely due to the severe lack of available homes in this price range. Big losses in the stock market, as well as inflation and global economic uncertainty, can weigh on high-end buyers. First-time buyers, who are likely more sensitive to rising mortgage rates, made up just 28% of sales, down from 29% a year earlier. This cohort typically makes up 40% of home purchases. Investors or second home buyers fell, buying just 16% of homes sold in October compared to 17% in October 2021. Mortgage rates are now more than double the record lows seen just earlier this year. But the recent volatility in interest rates is also wreaking havoc on potential buyers. Interest rates rose in June, fell in July and August, and continued even higher in September and October. Then they fell back quite sharply last week. “For many, the week-to-week volatility in mortgage rates alone, which in 2022 was three times the typical rate, may be a good reason to wait,” noted Danielle Hale, chief economist at Realtor.com. “With weekly changes in mortgage rates causing $100+ fluctuations in monthly housing costs for a median-priced home, it’s hard to know how to set and stick to a budget.”
