Existing Home Sales Slide in October to Lowest Level Since 2010 on Higher Mortgage Rates, Limited Inventory

Sales of existing homes fell by 4.1% in October as a shortage of houses for sale and higher mortgage rates dampened activity, the National Association of Realtors said on Tuesday.

The annual level of sales reached 3.79 million, down 14.6% from a year ago when sales were 4.44 million. That marks the lowest level of activity in 13 years. The median price of a house sold, however, rose by 3.4% to $391,800.

“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said NAR Chief Economist Lawrence Yun. “Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market.”

Three of the four regions of the country saw monthly sales declines, with the Midwest holding steady. On a yearly basis, sales were down in all four regions.

Although the news is bad for those looking to buy a house, existing homeowners are sitting pretty.

“While circumstances for buyers remain tight, home sellers have done 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 housing wealth over the past three years.”

The housing market is caught between sellers who don’t want to part with their homes that have low mortgage rates and prospective buyers who are struggling to afford houses with mortgage rates above 7%. Rates have fallen recently but were close to 8% in October.

“Housing affordability continues to be a major headwind, and many potential buyers are likely caught in the tug of war between holding out and waiting for better pricing and mortgage rate conditions or rushing to beat potentially worse conditions,” said Realtor.com Chief Economist Danielle Hale.

There is some relief, however, as mortgage rates have fallen in the past week. The current rate on a 30-year fixed rate loan is now about 7.5%, but that is below the 8% mark reached a few weeks ago. Some housing industry analysts believe rates could trend under 7% early next year as overall interest rates begin falling amid expectations the Federal Reserve is done raising rates.

The Fed will issue the minutes of its November meeting later Tuesday, and analysts will be looking for some signal on the future path of interest rates though markets are now pricing in almost no chance of a rate hike at the upcoming meeting. They remain divided, however, on how quickly the Fed could lower interest rates.