Sales of previously owned U.S. homes fell for a record ninth straight month in October as a steep climb in mortgage rates continues to pummel the housing market.
Contract closings decreased 5.9% to an annualized pace of 4.43 million last month, the slowest since May 2020, according to data from the National Association of Realtors on Friday. Sales declined in all four regions, and nationwide, the pace of purchases was in line with the median projection in a Bloomberg survey of economists.
Home sales have fallen every month since February, marking the longest string of declines in data back to 1999. The Federal Reserve’s efforts to combat inflation through interest rates have fueled a rapid run-up in borrowing costs, crushing demand and pushing homeownership out of reach for many families.
“More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher,” Lawrence Yun, NAR’s chief economist said in a statement. “Mortgage rates have come down since peaking in mid-November, so home sales may be close to reaching the bottom in the current housing cycle.”
Mortgage rates have just recently retreated to below 7%, but even so, they remain extremely elevated. Fed officials this week have said that they still have a ways to go on tightening policy, though some have noted that a recent cooling in price pressures could soon warrant a slower pace of rate hikes.
Separate data out earlier this week showed builders are pulling back as well. New construction of single-family homes dropped to the lowest since May 2020, and homebuilder sentiment has fallen every month this year.
The number of homes for sale slipped from September to 1.22 million, the third straight drop. In addition to a sizable pullback in housing demand, homeowners who have locked in lower mortgage rates may be hesitant to list their homes.
At the current sales pace it would take 3.3 months to sell all the homes on the market, up from 2.4 months in October 2021. Realtors see anything below five months of supply as indicative of a tight market. Yun noted that about a quarter of homes were sold above list price, underscoring the lack of inventory and how some properties are still receiving multiple offers.
The median selling price was up 6.6% from a year earlier to $379,100.
Properties remained on the market for longer in October but are still moving at a swift pace when compared to the pre-pandemic housing market. Some 64% of homes sold were on the market for less than a month.
First-time buyers made up 28% of purchases in October, a depressed level and down from a month earlier.
Cash sales represented 26% of total sales. Investors, who often purchase with cash and are therefore less sensitive to mortgage rates, made up 16% of the market.
Sales of single-family homes dropped 6.4% from a month earlier to the lowest level since May 2020, while existing condominium and co-op sales fell 2%.
Existing-home sales account for about 90% of U.S. housing and are calculated when a contract closes. New-home sales, which make up the remainder, are based on contract signings, and will be released next week.