A “For Sale” sign outside a home in Albany, California, on Tuesday, May 31, 2022.
David Paul Morris | Bloomberg | Getty Images
Home sales declined for the ninth straight month in October as higher interest rates and rising inflation kept buyers on the sidelines.
Sales of previously owned homes fell 5.9% from September to October, according to the National Association of Realtors. This is the slowest pace since December 2011, with the exception of a very brief dip at the start of the Covid-19 pandemic.
The October reading put sales at a seasonally adjusted annualized pace of 4.43 million units. Sales were 28.4% less year-on-year.
Although sales are slowing, 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. That’s 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, however, are being pared as the seasonal decline in home prices this time of year appears to be much deeper than usual.
“Inventory levels are still tight, which is why some homes for sale are still receiving multiple offers,” said Lawrence Yun, NAR chief economist. “In October, 24% of homes received above asking price. In contrast, homes that were on the market for more than 120 days saw prices drop by an average of 15.8% “.
Overall, homes were contracted 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 of 2022 were on the market for less than a month, suggesting there is still strong demand if the home is priced right.
While sales are now down at all price points, they’re weakening the most in the $100,000-$250,000 and $1 million-plus range. At the lower end, this is likely due to the severe shortage of homes available in this price range. Big losses in the stock market, as well as inflation and global economic uncertainty, may be affecting high-end buyers.
First-time buyers, who are likely to be more sensitive to rising mortgage rates, accounted for just 28% of sales, down from 29% a year earlier. This cohort usually represents 40% of home purchases. Investors or second-home buyers pulled back, buying just 16% of homes sold in October, compared with 17% in October 2021.
Mortgage rates are now more than double the historic lows seen earlier this year. But recent rate volatility is also wreaking havoc on potential buyers. Rates shot up in June, leveled off again in July and August, and continued even higher in September and October. Then they went down again quite sharply last week.
“For many, the week-to-week volatility in mortgage rates alone, which by 2022 has been three times what it used to be, may be a good reason to wait,” said Danielle Hale, chief economist at Realtor.com. “With weekly changes in mortgage rates causing swings of more than $100 in monthly housing costs for an average-priced home, it’s hard to know how to set and stick to a budget.”