Sales of previously owned homes were down 4.1% in October compared to September, with a seasonally adjusted annualized rate of 3.79 million units, according to the National Association of Realtors.
This was the slowest sales pace since August 2010. Analysts had expected a smaller decline, to 3.9 million units. Sales fell 14.6% year over year.
October sales are based on contracts likely signed in August and September. The average 30-year fixed mortgage rate had fallen to almost 7% at the end of August, but then began to rise sharply, rising above 8% in mid-October. Rates have declined somewhat since then.
“Potential homebuyers experienced another difficult month due to the continued lack of housing inventory and the highest mortgage rates in a generation,” said Lawrence Yun, NAR’s chief economist. “However, there are still multiple offers, especially on starter and mid-price homes, even as price concessions are taking place at the higher end of the market.”
At the end of October, there were 1.15 million homes for sale, a decrease of 5.7% compared to a year earlier. This is approximately half of the number of homes that were for sale before the corona crisis. At the current sales pace, this corresponds to a supply for 3.6 months. a six-month supply is considered a balanced market between buyer and seller.
The tight supply kept prices under pressure. The average price of an existing home sold in October was $391,800, up 3.4% from a year ago ($378,800). Prices rose in all regions of the country. These annual price increases have increased for four months in a row. About 28% of homes are sold above list price.
“Although conditions remain tight for buyers, home sellers have done well as prices continue to rise year after year, including a new record for the month of October,” Yun said. “In fact, the average homeowner has built more than $100,000 in home equity over the past three years.”
Sales fell across all price ranges to $750,000, but there was an increase in sales of higher-priced homes. Homes priced above $1 million rose just over 9% from a year ago. Wealthier buyers usually do not use mortgages or are less sensitive to monthly interest rate changes. Yun also noted that there are more homes for sale at the higher end of the market.
New buyers represented 28% of October sales, unchanged from a year ago and still significantly lower than the 40% share they historically represented. Individual investors bought 15% of homes, up from 18% in September and 16% from a year ago. All-cash deals represented 29% of sales, up from 26% in October 2022.
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